Columbia  Untoersftp 


PRINCIPLES  OF  ACCOUNTING 
Business  25-26 


NEW  YORK 

1916 


PRACTICE  DATA  AND  PROBLEMS 

FOR 

PRINCIPLES  OF  ACCOUNTING 


BY 

R.  B.  KESTER 

AND 

S,  B.  KOOPMAN 


NEW  YORK 
1916 


COPYRIGHT,    1916,  BY  R.  B.   KESTER  AND  S.   B.   KOOPMAN 


PROBLEMS 

1.  From  the  following  information  set  up  ledger  accounts,  take  a  trial  balance, 
close  the  ledger  through  the  journal,  and  make  summary  statements  as  of  De- 
cember 31: 

Notes  Receivable  on  hand,  $3,000;  Accounts  Receivable,  $7,500;  Notes  Pay- 
able, $2,100;  Accounts  Payable,  $4,600;  Real  Estate,  $6,000;  Plant  and  Machin- 
ery, $8,000;  Rent  and  Taxes,  $600;  General  Expense,  $2,000;  Salaries,  $1,500; 
Wages,  $600;  Freight,  $150;  Duty,  $200;  Cash  on  hand,  $150;  Cash  in  bank, 
$1,800;  Bad  debts  written  off,  $140;  Goods  on  hand  at  beginning  of  year,  $9,500; 
Purchases,  $26,000;  Sales,  $40,000;  Interest  paid,  $210;  Furniture,  $600;  Jas. 
Buckham,  partner,  invested  $10,000,  withdrew  $1,450;  E.  J.  Cockburn  invested 
$14,000,  withdrew  $1,300;  the  merchandise  on  hand  is  valued  at  $9,000;  Rent 
unpaid,  $250;  Insurance  unexpired  $140;  Interest  accrued  on  notes  receivable, 
$25;  Wages  accrued,  $115.  Allow  10%  depreciation  on  Plant  and  Machinery 
and  I2>^%  on  Furniture.  Estimate  losses  from  bad  debts  as  5%.  Losses  and 
gains  are  divided  4-7  to  Cockburn  and  3-7  to  Buckham,  allowing  interest  on 
capitals  at  6%. 

2.  At  the  end  of  the  first  year  of  a  partnership,  Wilson  has  an  interest  of 
$18,000  and  Peters  of  $9,000,  each  drawing  profits  in  proportion  to  his  capital. 
They  decide  to  admit  Johnson  into  the  partnership  selling  him  a  one-quarter 
interest,  valuing  their  good- will  at  $3,000.   Under  the  conditions  named,  in 
what  two  ways  may  Johnson  secure  his  interest?   What  will  be  the  amount  of 
his  investment? 

3.  J.  B.  Rogers  and  B.  R.  Jay,  owners  of  similar  businesses,  agree  to  consolidate 
under  a  partnership  agreement  whereby  each  turns  over  his  business  as  it  stands, 
subject  to  the  liabilities  shown  and  the  deficient  partner  contributes  sufficient 
cash  to  equalize  their  capitals.    Rogers's  standing  is:   Cash,  $750;  Stock,$3,9OO; 
Notes  Receivable,  $1,000  with  interest  accrued  on  same,  $10.25;  Accounts  Re- 
ceivable $750  estimated  as  worth  $725;  Furniture,  $975;  Notes  Payable  $1,000 
being  his  personal  non-interest  bearing  note  at  60  days  discounted  at  8%  with 
20  days  yet  to  run;  Accounts  Payable,  $325.   Jay's  standing  is:  Cash,  $365; 
Stock,   $4,500;  Accounts   Receivable,   $1,350,   guaranteed  as  good;  Furniture, 
$825;  Delivery  Equipment,  $325,  valued  at  $300;  Accounts  Payable  $265 ;  Notes 
Payable  $1,200  with  accrued  interest  of  $8.69;  Salaries  earned  but  unpaid,  $50. 
The  furniture  in  each  case  is  taken  in  at  its  face  value.    Make  the  opening  journal 
entry  and  balance  sheet  for  the  new  firm.    Make  journal  entries  for  each  partner 
to  close  his  old  set  of  books. 


418850 


II 

PRACTICE  DATA 

Messrs.  Stanley  Jackson,  J.  T.  Edwards,  and  P.  Hansen,  on  September  I,  1909, 
made  application  as  incorporators  to  the  Secretary  of  State  for  a  Certificate  of 
Incorporation  authorizing  the  Acme  Office  Furnishings  Company  to  transact  a 
general  business  of  all  kinds  in  trading,  manufacturing,  and  printing,  as  prin- 
cipals or  as  agents,  to  acquire  and  trade  in  real  estate,  patents,  trademarks, 
licenses,  and  the  like,  and  to  act  as  promotion  and  financial  agents.  The  cus- 
tomary certifications  were  made,  the  organization  tax  of  $50  was  paid,  and  the 
certificate  duly  issued.  The  authorized  capital  was  $100,000  divided  into  1,000 
shares  of  common  stock  only  of  par  value  $100  each.  Subscriptions  at  par  to 
capital  stock  had  been  made  as  follows: 

Stanley  Jackson  225  shares 

J.  T.  Edwards  162      " 

P.  Hansen  113      " 

T.  J.  Noble  100      " 
A.  H.  Lawrence  75 

H.  C.  McCullough  50      " 

At  the  first  meeting  o£  the  incorporators  and  subscribers,  after  the  adoption 
of  a  set  of  by-laws  and  organization  thereunder,  a  proposal  of  sale  made  by  the 
Jackson,  Edwards,  Hansen  firm  of  their  business  and  good-will  at  a  stated  figure 
of  $50,120.97  was  referred  to  the  Board  of  Directors  for  their  consideration  and 
investigation,  with  authority  to  act.  After  looking  over  the  properties,  all  of 
which  it  was  found  would  be  advantageous  to  the  company,  the  proposal  was 
accepted  and  transfer  was  made.  A  committee  from  the  Board  was  appointed 
to  make  a  careful  appraisal  of  the  purchased  properties  and  report  as  soon  as 
possible.  Accordingly  on  September  15,  the  following  report  of  valuation  was 
made  and  accepted  and  authority  given  for  the  opening  up  of  a  set  of  accounting 
records  with  the  stated  values  of  the  properties.  The  services  of  a  public  ac- 
countant were  secured  to  plan  and  install  a  system  that  would  meet  the  needs  of 
the  proposed  business  and  to  open  the  books.  The  properties  acquired  were: 
Cash,  $5,269.14;  Accounts  Receivable,  as  per  schedule  following,  $10,125.61; 
Notes  Receivable,  $1,250;  Desks  and  Tables,  Inventory  $15,694.00;  Bookcases 
and  Filing  Cabinets,  Inventory,  $18,392.00;  Sundry  Office  Supplies,  Inventory, 
$8,196.27;  Rent  prepaid,  $125.00;  Insurance  unexpired,  $95.36;  Delivery  Equip- 
ment, $492.50;  Store  Furniture  and  Fixtures  $526.00;  Office  Furniture  and  Fix- 
tures, $274.00;  Good  Will,  $4,500.00:  The  liabilities  assumed  were  Accounts 
Payable,  as  per  schedule  following,  $10,126.73;  Notes  Payable  $4,692.18.  Upon 
the  guaranty  of  Jackson,  Edwards,  Hansen  of  the  accounts  and  notes  receivable 
taken  over,  the  company  assumed  the  contingent  liability  on  notes  receivable 
under  discount  amounting  to  $250.00.  Payment  was  made  to  Jackson,  Edwards, 
Hansen  by  the  cancellation  of  indebtedness  on  their  subscription  contracts  in 
the  amounts  severally  shown,  and  in  cash  for  the  balance,  distributed  in  the 
ratio  of  their  subscriptions. 


A.  H.  Lawrence  and  H.  C.  McCullough  on  September  20,  paid  in  cash  75%  of 
their  subscriptions,  the  balance  due  in  30  days. 

Certificates  of  stock,  properly  executed,  were  issued  to  all  the  above  mentioned 
parties  in  the  amounts  of  their  subscriptions. 

Open  the  books  and  prepare  a  balance  sheet  of  the  company  according  to  the 
data  given. 

INSTRUCTIONS 

The  first  43  pages  of  the  ledger  blank  constitute  the  General  Ledger,  the  next 
4  the  Customers  Ledger,  and  the  next  3  the  Creditors  Ledger. 

Open  the  following  accounts  in  the  various  ledgers  as  indicated.  The  numeral 
preceding  the  account  title  indicates  the  ledger  folio  on  which  the  particular 
accounts  are  to  be  opened. 

GENERAL  LEDGER 

Note:  Trade  Debtors  and  Subscription  should  each  be  allowed  16  lines,  shortening 
the  allowance  for  the  account  next  succeeding  or  preceding.  All  others,  1-3  page  to 
each. 

1.  Knoxfraud  Mfg.  Co.,  Common  Stock 
Knoxfraud  Mfg.  Co.,  Preferred  Stock. 
Knoxfraud  Mfg.  Co., 

2.  Plant  and  Sundry  Assets. 
Jackson,  Edwards,  Hansen,  Vendors. 
Organization  Expense. 

3.  Goodwill 

Patents  and  Trade  Marks. 
Factory  Land. 

4.  Machinery. 

Depreciation  Reserve  Machinery. 
Tools. 

5.  Factory  Buildings. 

Depreciation  Reserve  Factory  Buildings. 

6.  Power  Equipment. 

Depreciation  Reserve  Power  Equipment. 

7.  Furniture  and  Fixtures. 

Depreciation  Reserve  Furniture  and  Fixtures. 

8.  Patterns. 

Depreciation  Reserve  Patterns. 

9.  Delivery  Equipment. 

Depreciation  Reserve  Delivery  Equipment. 

10.  Merchandise  Inventory. 
Raw  Materials  Inventory 
Goods  in  Process  Inventory. 

11.  Knoxfrauds. 

Boston  Office  Co.  Consignments 
Accounts  Receivable  Special. 

12.  Prepayment  on  Purchases. 


Trade  Debtors. 

Reserve  for  Doubtful  Accounts. 

13.  Notes  Receivable  Special. 
Notes  Receivable. 

Notes  Receivable  Discounted. 

14.  Sinking  Fund. 
Petty  Cash. 

Drew  National  Bank. 

15.  Notes  Payable. 
Vouchers  Payable. 

Purchase  Money  Mortgage  on  Machinery. 

1 6.  Bonds. 
Unissued  Bonds. 
Discount  on  Bonds. 

17.  Unissued  Capital  Stock. 
Capital  Stock  Common. 
Capital  Stock  1st  Preferred. 

18.  Capital  Stock  2nd  Preferred. 
Discount  on  Stock. 
Subscription. 
Subscribers. 

19.  Call  No.  i. 
Call  No.  2. 
Treasury  Stock. 

20.  Surplus. 

Donated  Working  Capital. 
Sinking  Fund  Reserve. 

21.  Dividends  on  Common. 
Dividends  on  First  Preferred. 
Dividends  on  Second  Preferred. 

22.  Raw  Material  Purchases. 
Desks  and  Tables  Purchases. 
Bookcases  and  Filing  Cabinet  Purchases. 

23.  Sundry  Office  Supplies  Purchases. 
In.  Freight  and  Delivery. 
Direct  Labor. 

24.  Indirect  Labor. 
Factory  Supplies. 
Light,  Heat  and  Power. 

25.  Royalties. 

Sundry  Factory  Expense. 
Building  Maintenance  and  Repairs. 

26.  Machinery  Repairs. 
Experimental  Expense. 
Depreciation. 

27.  Assembling  and  Setting  Up  Expense. 
Receiving  and  Shipping  Room  Expense. 


Desks  and  Tables  Sales. 

28.  Desks  and  Tables  Returned  Sales  and  Allowance. 
Bookcases  and  Filing  Cabinets  Sales. 

Bookcases  and  Filing  Cabinets  Returned  Sales  and  Allowance. 

29.  Sundry  Office  Supplies  Sales. 

Sundry  Office  Supplies  Returned  Sales  and  Allowance. 
Knoxfraud  Sales. 

30    Knoxfraud  Returned  Sales  and  Allowance. 
Warehouse  Expense. 

31.  Warehouse  Rent. 
Delivery  Expense. 
Salesmen's  Salaries. 

32.  Salesmen's  Travelling  Expenses. 
Salesmen's  Commissions. 
Advertising. 

33.  Sundry  Selling  Expense. 
Office  Salaries. 
Stationery  and  Printing. 

34.  Telephone,  Telegraph  and  Postage. 
Sundry  Office  Expense. 

Rent. 

35.  Interest  and  Discount. 
Collection  Expense. 
Insurance. 

36.  Taxes. 

Bond  Interest. 

Loss  from  Sale  of  Power  Equipment. 

37.  Purchase  Discount. 
Sales  Discount. 
Rent  Income. 

38.  Commission  Income. 
Bad  Debts. 

Fire  Loss. 

39.  Strike  Costs. 
Damage  Claims. 
Damage  Claims  Reserve. 

40.  Manufacturing. 

41.  Trading. 

42.  Profit  and  Loss. 

CUSTOMERS  LEDGER 
Allow  1-3  page  to  each  account. 

44.   Smith  Brooks  Stationery  Co. 
The  Brush  Co. 
The  Kistler  Stationery  Co. 


45.  C.  F.  Hoeckle  Office  Supply  Co. 
John  Bach  &  Sons. 

T.  J.  Stewart  Office  Specialties  Co. 

46.  Saxon  Edwards. 
T.  C.  Macie  &  Co. 

The  Alexander  Jacobs  Co, 

47.  Field  Marshall  &  Co. 
Sundry  Customers. 
Salesmen  Advances. 


CREDITORS  LEDGER 


48.    P.  J.  Johnson  Mills  Co. 

B.  F.  Brainard  &  Co. 

Jackson  City  Supply  Co. 
49-   F.  C.  Good  Rubber  Co. 

B.  A.  Franklin  Press. 

Brickley  Desk  Co. 
50.    R.  M.  Goddard  Furniture  Co. 


Ill 

PROBLEMS 

1.  The  Ibex  Manufacturing  Company  is  incorporated  with  an  authorized 
capital  of  $500,000  common  stock  and  $250,000  6%  preferred  stock.   $150,000 
of  the  preferred  is  subscribed  for  and  paid  in  full.   One-half  of  the  common  is 
subscribed  for  and  50%  paid  in,  the  balance  to  be  paid  in  five  monthly  install- 
ments.  The  remaining  preferred  stock  is  later  subscribed  for  at  101  and  50% 
paid  and  half  of  the  remaining  common  is  subscribed  for  at  90  and  paid  in  full. 
After  operating  for  six  months  the  remaining  common  is  sold  at  102  to  provide 
funds  for  enlargement;  one-half  paid  in  cash  and  the  balance  in  one  month. 
Bring  all  of  the  above  transactions  onto  your  journal. 

2.  At  the  close  of  the  first  year,  the  Ibex  Manufacturing  Co.,  being  short  of 
ready  funds  and  not  desiring  to  extend  its  credit  further,  secures  from  its  stock- 
holders a  donation  of  $50,000  common  and  $10,000  preferred,  one-half  of  which 
is  immediately  sold  at  90  and  101  respectively.   At  the  end  of  the  second  year 
the  remainder  of  the  donated  stock  was  disbursed  to  the  stockholders  as  a  divi- 
dend, net  profits  for  the  year  amounting  to  $45,000.   Journalize  all  the  above 
transactions,  showing  ultimate  disposition  of  the  working  capital. 

3.  The  Smith  Brooks  Publishing  Co.  has  a  capital  of  $750,000  of  which  one- 
third  is  6%  cumulative  preferred  stock.   The  company  has  a  surplus  of  $65,000. 
It  has  an  outstanding  bond  issue  of  $200,000  at  4^%  interest.   The  profits  for  the 
year  are  $61,392.75.    No  profits  have  been  distributed  for  three  years.   The 
directors  pay  the  bond  interest,  declare  a  3%  dividend  on  common  and  carry 
$7,500  to  the  Sinking  Fund.    Bring  all  of  the  above  onto  your  books. 

4.  A  corporation  has  been  formed  with  an  authorized  capital  stock  of  $200,000, 
one-fourth  of  which  is  7%  cumulative  preferred.   The  entire  issue  of  preferred 
is  subscribed  for  at  par  and  50%  paid  in.   When  the  balance  is  paid,  one  share 
of  common  is  to  be  given  as  a  bonus  with  every  five  shares  of  preferred.   The  pro- 
moter of  the  company  is  given  $15,000  in  common  for  his  services.   The  company 
paid  cash  $250  for  new  set  of  records;  $25  for  corporate  seal;  $500  for  lawyer's 
fees  in  incorporating;  $250  for  state  charter;  and  $375  for  sundry  expenses  in 
organizing.   $75,000  of  the  common  stock  has  been  subscribed  for  at  par  to  be 
paid  in  five  monthly  installments.   The  balance  has  been  paid  on  the  preferred 
stock  and  three  installments  on  the  common.    Make  journal  entries  covering 
the  above  transactions. 


IV 
PROBLEMS 

1.  Draw  up  a  form  of  voucher  check  suitable  for  a  professional  man. 

2.  Draw  up  a  form  of  voucher  check  suitable  for  a  trading  concern. 

3.  Draw  up  a  form  of  voucher  register  for  a  manufacturing  concern  desiring 
to  segregate  manufacturing,  trading,  and  general  expenses  under  which  there 
are  twelve,  ten,  and  fifteen  subdivisions  of  expense,  respectively.    Provide  for 
other  possible  expenditures.   Treat  purchases  discounts  as  a  reduction  of  cost 
price. 

4.  What  change  would  you  make  for  treating  purchases  discount  as  a  general- 
administrative  expense. 

5.  Using  your  own  data  for  a  purchase  ledger  in  which  there  are  at  least  six 
open  accounts,  show  the  entries  necessary  to  close  it  and  open  a  voucher  regis- 
ter to  take  its  place. 


V 
PRACTICE  DATA 

The  following  schedules  support  their  respective  titles  found  among  the  assets 
and  liabilities  taken  over  and  appraised  by  the  Acme  Office  Furnishings  Co.: 

ACCOUNTS  RECEIVABLE: 

Smith  Brooks  Stationery  Co.  6-24,  $750;  7-7  $100;  8-25  $113.14, 

2/10  $963-14 

The  Brush  Co.  5-20  $825;  8-15  $216.69,  2/10,  1/30  1,041.69 
The  Kistler  Stationery  Co.  4-18  $1,000;  6-15  $250;  8-20  $317.40, 

2/10  1,567-40 

C.  F.  Hoeckle  Office  Supply  Co.  3-12  $1,000;  7-18  $123.90  1,123.90 

John  Bach  &  Sons,  6-13  $300;  7-30  $119.36  419.36 

T.  J.  Stewart  Office  Specialties  Co.  7-20  $319.45;  8-12  $523.12  842.57 

Saxon  Edwards  2-10  $585;  5-23  $206.75  791-75 
T.  C.  Macie  &  Co.  5-11  $115.10;  6-21  $210.15;  7-8  $450;  8-25 

$465.15,  2/10,  n/30  1,240.40 

The  Alexander-Jacobs  Co.  8-28  $362.25,  3/5,  2/10  362.25 
Field,  Marshall  &  Co.  6-15  $1,015.05;  7-6  $250;  8-24  $508.10, 

2/10,  n/30  1,773.15 
ACCOUNTS  PAYABLE 

'    The  P.  J.  Johnson  Mills  Co.  1-15  $1,895.60,  8-5  $736.15,  1/30  $2,631.75 

B.  F.  Brainard  &  Co.  4-18  $590.10;  7-11  $802.15  1,392.25 

Jackson  City  Supply  Co.  6-10  $512.60;  6-25  $428.20;  7-18  $622  1,562.80 

F.  C.  Good  Rubber  Co.  7-1  $175.19;  8-13  $300,  2/10,  1/30  475-19 

B.  A.  Franklin  Press  5-2  $850;  6-22  $262.15  1,112.15 

Brickley  Desk  Co.  3-8  $912.50;  5-6  $1,500;  8-16 $540.09,  2/10, 1/30  2,952.59 

NOTES  RECEIVABLE 

John  Bach  &  Sons,  dated  7-4  for  3  mos.  with  interest  at  6%  and  discounted 
at  the  Drew  National  Bank  8-16  at  8%.  Face  of  note  $250. 

Andrew  Jackson,  dated  8-25  for  60  das.,  without  interest.   Face  $750. 
The  Brush  Co.,  dated  7-29  for  2  mos.  with  interest  at  6%.   Face  $500. 

NOTES  PAYABLE 

No.  91,  favor  Second  National  Bank  for  $2,500,  dated  7-15  at  3  mos.  dis- 
counted at  6%. 

No.  95,  favor  Brickley  Desk  Co.  for  $1,261.40,  dated  8-20  at  4  mos.,  interest 
6%. 

No.  96,  favor  B.  F.  Brainard  &  Co.,  for  $930.78,  dated  8-25  at  60  days.,  in- 
terest 6%. 


The  new  system  provides  for  a  Voucher  Register  but  due  to  delay  on  the  part 
of  the  printer,  a  creditors'  ledger  will  have  to  be  opened  temporarily,  using  the 
last  two  pages  of  your  customers'  ledger  for  that  purpose.  Open  the  Sales  and 
Purchases  Ledger  according  to  the  data  given. 

The  Board,  having  completed  negotiations  with  T.  J.  Noble,  authorizes  the 
purchase  from  him  of  the  whole  of  his  right,  title,  and  interest  in  a  patent  de- 
vice known  as  Knoxfraud  for  the  purpose  of  preventing  the  raising  of  the  amounts 
of  commercial  paper.  The  transfer  is  made,  including  the  trademark  covering 
"Knoxfraud"  and  payment  to  Noble  is  made  by  the  cancellation  of  90  shares 
on  his  subscription  contract  and  full  paid  stock  is  issued  him  therefor.  Make 
the  entry  under  date  of  September  20. 


VI 
PRACTICE  DATA 

The  directors  plan  to  keep  sufficient  funds  on  hand  that  they  may  be  able  to 
take  advantage  of  all  discounts  offered  on  purchases.  All  invoices  will,  there- 
for, be  entered  "net"  in  the  Vouchers  Payable  column  of  the  Voucher  Register. 
Extension  will  be  "gross"  however.  In  order  to  avoid  detail  all  additional  cus- 
tomers will  be  handled  under  a  collective  account  in  the  Sales  Ledger  called 
Sundry  Customers.  Transactions  will  be  grouped  and  summarized.  Make 
records  under  proper  dates. 

The  transactions  ending  November  30,  1909,  were  as  follows: 
September  I,  received  check  for  $311.05  from  Kistler  Stationery  Co.  in  pay- 
ment of  their  bill  of  8-20  less  $6.35  discount.  September  3,  Alexander  Jacobs 
Co.  paid  their  bill  of  8-28  $362.25  less  $10.87  discount.  Sold  the  Brush  Co.  at 
2-10,  n~3O,  desks  and  tables  $875.40  and  bookcases  $469.75.  Sept.  4,  drew 
petty  cash  voucher-check  for  $150  and  placed  it  in  petty  cash  drawer  in  charge 
of  bookkeeper.  Field  Marshall  and  Co.  paid  their  bill  of  8-24  $508.10,  less 
$10.16  discount,  and  $500  on  account.  September  5,  paid  P.  J.  Johnson  Mills 
Co.  bill  of  8-5  $736.15,  less  discount  $7.36,  and  $500  on  account.  Smith  Brooks 
Stationery  Co.  paid  their  bill  of  8-25  $113.14  less  $2.26  discount.  T.  C.  Macie 
&  Co.  paid  their  bill  of  8-25  $465.15  less  $9.30.  September  6,  bought  of  R.  M. 
Goddard  Furniture  Co.  at  1-30,  n-6o,  desks  and  tables  $5,912.60,  bookcases 
$3,190.10,  and  office  supplies  $837.40.  Sold  C.  F.  Hoeckle  Office  Supply  Co. 
n~3O  desks  $1,512.75,  filing  cabinets  $647.80,  office  supplies  $215.69.  September 
8,  C.  F.  Hoeckle  Office  Supply  Co.  paid  $750  on  account.  Sept.  9,  paid  B.  F.  Brain- 
ard  &  Co.  bill  of  4-18  $590.10;  sold  T.  C.  Macie  &  Co.  at  2-5,  i-io,  tables 
$1,575.50,  filing  cabinets  $440.25,  office  supplies  $175.30.  September  n,  paid 
Jackson  City  Supply  Co.  bill  of  6-10  $512.60.  Sept.  12,  sold  C.  F.  Hoeckle 
Office  Supply  Co.  at  1-30,  n-6o  tables  and  desks  $1,895,  bookcases  $625.30, 
office  supplies  $110.85.  September  13,  paid  F.  C.  Good  Rubber  Co.  bill  of  8-13 
$300  less  $3  discount;  Jno.  Bach  &  Sons  paid  $250  on  account;  the  Brush  Co.  paid 
their  bill  of  9-3  $1,345.15  less  $26.90  discount.  September  15,  paid  Brickley  Desk 
Co.  bill  of  8-16  $540.09  less  $5.40  discount  and  bill  of  3-8  $912.50  less  special 
discount  of  $12.50  in  consideration  of  giving  our  note  No.  I,  for  $1,500  at  6% 
payable  in  6  mos.  in  settlement  of  bill  of  5-6  $1,500.  Brush  Co.  paid  bill  of 
8-15  $216.69  less  $2.17  discount.  Sold  Jno.  Bach  &  Sons  at  2-10,  n~3O  desks 
$1,680,  filing  cabinets  $725.90,  office  supplies  $240.60.  September  16,  bought  of 
P.  J.  Johnson  Mills  Co.  at  2-10,  n~3O,  tables  $3,085.95,  bookcases  and  filing 
cabinets  $5,293.85,  office  supplies  $1,750.90.  September  18,  T.  J.  Stewart  Office 
Specialties  Co.  paid  their  bill  of  7-20  $319.45;  sold  Alexander  Jacobs  Co.  at  1-30, 
n-6o,  desks  $1,465.85,  bookcases  $625.95,  office  supplies  $145.60.  September  19, 
T.  C.  Macie  &  Co.  paid  their  bill  of  9-9  $2,191.05  less  $21.91  discount.  September 
2 1,  sold  Saxon  Ed  wards,  at  2-5,  i-io,  tables  and  desks  $1,327. 85,  bookcases  $842.60, 
office  supplies  $222.60.  September  24,  sold  Field,  Marshall  &  Co.  at,  1-30,  n-6o 
tables  and  desks  $1,825,  bookcases  and  filing  cabinets  $735,  office  supplies  $246. 
September  25,  Saxon  Edwards  paid  on  account  $500.  September  26,  bought  of 


B.  F.  Brainard  &  Co.,  at  1-30,  n-6o,  desks  $4,675,  filing  cabinets  $5,080,  office 
supplies  $1,280;  Jno  Bach  &  Sons  paid  bill  of  9-15  $2,646.50  less  $52.93  dis- 
count; paid  P.  J.  Johnson  Mills  Co.  bill  of  9-16  $10,130.70  less  $202.61  discount. 
September  27,  sold  Smith  Brooks  Stationery  Co.  at  2-5,  i-io,  tables  and  desks 
$1,200,  bookcases  and  filing  cabinets  $1,150,  office  supplies  $175.  September  28, 
paid  B.  A.  Franklin  Press  bill  of  5-2  $850.  September  29,  Brush  Co.  paid  their 
note  of  7-29  $500  with  interest  $5;  the  Board  of  Directors  authorized  the  pur- 
chase of  a  piece  of  land  lying  outside  the  city  limits,  with  good  shipping  and  ware- 
house facilities,  to  be  used  as  a  sight  for  a  factory  for  the  manufacture  of  Knox- 
frauds,  paying  the  Hoboken  Development  Co.  $10,000  (with  the  current  year's 
taxes  of  $75  unpaid  and  due  February  I,  1910)  and  $125  to  J.  N.  Hicks  fees  in 
connection  with  special  search  of  title  and  recording  of  deed.  Plans  and  specifi- 
cations which  Noble  had  had  prepared  six  months  ago  when  negotiations  with 
him  had  been  opened  by  Jackson  in  behalf  of  the  Jackson-Edwards-Hanson 
firm,  were  adopted  and  ordered  placed  with  contractors  for  bids  to  be  received 
not  later  than  October  6,  the  Board  reserving  the  right  to  accept  any  or  reject 
all  bids.  September  30,  sold  Brush  Co.  at  2-5,  i-io,  tables  $1,475.80,  bookcases 
$723.85,  office  supplies  $340;  paid  salesmen's  salaries  $2,500,  commission  to 
salesmen  $500,  salesmen's  travelling  expense  $1,500,  in  freight  and  delivery 
$529.69,  delivery  expense  $200,  rent  9-15  to  10-15  $250,  receiving  and  shipping 
room  expense  $150,  sundry  office  expense  $100.25,  office  salaries  $600,  adver- 
tising $275,  petty  cash  voucher  $137.10  of  which  $45.50  was  for  telegraph,  tele- 
phone and  postage,  $50  for  office  supplies,  $25  for  sundry  selling  expense,  and 
$16.60  for  sundry  office  expenses;  Cash  sales  for  the  month  were,  office  supplies 
$1,325.40,  bookcases  $2,150,  desks  and  tables  $4,250. 


VII 

PROBLEM 

I.  Using  the  voucher  register  you  drew  up  for  problem  IV,  3,  from  your  own 
data,  make  at  least  one  entry  in  each  column  and  three  in  the  sundries  column. 
Show  the  register  foote'd,  closed,  and  posted. 


VIII 
PROBLEM 

Caxton  &  Dolton  began  business  January  I,  1902.  Caxton  invested  $12,000 
and  Dolton  invested  $11,000.  May  I,  1902  Caxton  withdrew  $3,000  and  Dolton 
invested  $1,000.  July  I,  1903,  Evans  was  admitted  to  the  partnership,  invest- 
ing $8,000.  October  I,  1903,  Evans  invested  $4,000  more  and  Dolton  withdrew 
$2,000.  July  i,  1904,  Dolton  and  Evans  purchased  Caxton's  interest  in  the 
business.  On  that  date  their  books  showed  the  following  financial  condition: 
Cash  $19,364.50;  Merchandise  $17,500;  Notes  Receivable  $10,000;  Accounts  Re- 
ceivable $8,945;  Interest  Receivable  $248.50;  Real  Estate  $6,500;  Accounts  Pay- 
able $14,000;  Notes  Payable  $5,130;  Interest  Payable  $167.40;  Accrued  Ex- 
penses $325.60.  For  the  purpose  of  the  sale  Good  Will  was  estimated  at  $5,000; 
depreciation  on  real  estate  5%;  bad  debts  at  3%.  Each  partner  was  to  share  in 
profits  on  the  basis  of  capitals  and  the  length  of  time  the  capital  was  invested. 
Of  the  purchase  price  of  Caxton's  share,  Dolton  and  Evans  were  to  pay  such 
amounts  respectively  as  would  make  their  new  capitals  equal.  Set  up  the  part- 
ner's ledger  accounts  and  show  all  entries  to  them  in  order  to  take  effect  of  all 
the  above  data. 


IX 
PRACTICE  DATA 

October  I,  delivery  of  the  voucher  register  having  been  made,  your  accountant 
closes  the  Purchase  Ledger  and  opens  the  Voucher  Register,  transferring  the 
balances  thereto.  The  Kistler  Stationery  Co.  presented  their  bill  for  $150 
($95-5°  for  accounting  books,  records,  etc.  and  $54.50  for  printing).  Paid  New  York 
Novelty  Works  $15  for  corporate  seal;  paid  Northwestern  Fire  Insurance  Co. 
$125  for  i  year  policy  on  stock  of  goods.  October  3,  sold  Jno.  Bach  &  Sons,  at 
2-10,  n~30,  desks  $1,755,  bookcases  and  filing  cabinets  $658.90,  office  supplies 
$140.  In  order  to  raise  money  for  the  purpose  of  building  and  equipping  the 
Knoxfraud  factory,  the  Board  of  Directors  authorized  the  sale  of  the  rest  of 
the  unsubscribed  stock  at  not  less  than  95.  Accordingly  subscriptions  were 
received  from  A.  J.  Scobey  for  90  shares  at  96,  from  A.  K.  Ladd  for  125  shares  at 
95,  and  from  J.  B.  Gaynor  for  60  shares  at  97.  One-half  is  received  in  cash,  the 
rest  due  on  the  25th  instant.  Certificates  of  stock  are  issued  the  new  stock- 
holders. October  4,  Smith  Brooks  Stationery  Co.  paid  their  bill  of  9-27  $2,525 
less  $50.50  discount.  October  5,  the  bank  notified  you  John  Bach  &  Son's  note 
for  $250,  dated  7-4  for  3  mos.  at  6%  and  under  discount  with  them  since  8-16 
has  gone  to  protest;  you  took  up  the  note,  drawing  your  check  in  favor  of  the 
Drew  National  Bank  for  $256.25  including  protest  fees,  and  notified  John  Bach 
&  Sons;  paid  R.  M.  Goddard  Furniture  Co.  bill  of  9-6  $9,940.10  less  $99.40 
discount.  October  6,  bought  of  Jackson  City  Supply  Co.,  at  1-30,  n-6o,  office 
supplies  $3,028.95;  sold  T.  C.  Macie  &  Co.,  at  2-5,  i-io,  desks  $1,685,  bookcases 
$642,  office  supplies  $156;  paid  Hoboken  Electric  Co.  light  and  power  bill  for 
September  $50  ($30  was  for  sign  display).  October  7,  the  bids  for  the  construction 
of  the  factory  were  opened  and  all  found  to  exceed  the  architect's  estimate  by 
$10,000  or  more.  It  was  accordingly  decided  to  reject  all  bids  and  construct 
the  factory  upon  their  own  responsibility,  retaining  I.  M.  Builder  as  supervising 
architect  and  appointing  J.  T.  Noble  as  purchasing  agent  and  general  superin- 
tendent during  construction.  All  funds  from  the  sale  of  stock  were  ordered 
placed  under  a  Building  Fund  account  in  the  Drew  National  subject  to  drawing 
by  Hansen  in  payment  of  all  bills  when  passed  for  payment  by  Edwards  and 
Noble.  The  transfer  of  funds  was  accordingly  made.  Alexander  Jacobs  returned 
desks  and  tables  $465.85  of  their  purchase  of  September  18.  Brush  Co.  paid 
their  bill  of  9-30  $2,539.65  less  $50.79  discount;  C.  F.  Hoeckle  Office  Supply  Co. 
paid  their  bill  of  9-6  $2,376.24.  October  8,  drew  check  for  $500,  advances  to 
salesmen,  which  the  bookkeeper  charged  to  an  account  entitled  Salesmen  Ad- 
vances opened  in  the  Customers  Ledger;  paid  N.  G.  Goodfigure,  accountant, 
$250  for  services.  October  9,  sold  Kistler  Stationery  Co.,  at  1-30,  n-6o,  tables 
and  desks  $1,858.95,  bookcases  and  cabinets  $720,  and  office  supplies  $248. 
October  10,  took  furniture  from  stock  for  store  and  office  (desks  and  tables  $150 
for  office  and  $300  for  store;  bookcases  and  filing  cabinets  $175  for  office  and 
$75  for  store).  October  n,  bought  from  the  New  Model  Truck  Co.,  delivery 
trucks  for  $3,000,  giving  our  note  with  6%  interest  at  6  mos.  for  $2,500  and  $500 
cash.  October  12,  sold  C.  F.  Hoeckle  Supply  Co.,  at  1-30,  n-6o,  tables  and 
desks  $1,625,  bookcases  and  cabinets  $720,  and  office  supplies  $140.  October 


13,  received  J.  T.  Noble's  demand  note  without  interest  for  $1,000  in  payment 
of  balance  of  subscription  contract;  the  C.  F.  Hoeckle  Office  Supply  Co.  paid  bill 
of  9-12  $2,631.15,  less  $26.31  discount;  T.  C.  Macie  &  Co.  paid  their  bill  of 
10-6  $2,483  less  $49.66  discount;  October  15,  sold  Alexander  Jacobs  Co.  at  1-30, 
n-6o,  desks  $1,825.85,  bookcases  $642,  office  supplies  $240;  paid  note  No.  91, 
$2,500;  Jno.  Bach  &  Sons  paid  their  bill  of  10-3  $2,553.90  less  $46.98  discount 
and  an  allowance  of  $50  on  bookcases  and  $155  on  tables  account  of  damage. 
October  16,  bought  of  R.  M.  Goddard  Furniture  Co.,  at  1-30,  n-6o,  tables  and 
desks  $9,425,  bookcases  and  cabinets  $8,227,  office  supplies  $1,025.  October  18, 
sold  T.  J.  Stewart  Office  Specialties  Co.,  at  2-5,  i-io,  desks  and  tables  $1,878, 
bookcases  and  cabinets  $580,  office  supplies  $249.  October  19,  Alexander  Jacobs 
&  Co.  paid  their  bill  of  9-18  $1,771.55  less  $17.72  discount.  October  20,  T.  J. 
Stewart  Office  Specialties  Co.  returned  office  supplies  $49.50  and  cabinets  $75 
of  their  purchase  of  October  18;  A.  H.  Lawrence  and  H.  C.  McCullough  paid 
$3,125,  the  balance  on  their  subscriptions.  October  24,  Andrew  Jackson  paid 
his  note  of  8-25,  $750;  the  T.  J.  Stewart  Office  Supplies  Co.  paid  their  bill  of 
10-18  $2,582.50  less  $51.65;  sold  Field,  Marshall  &  Co.  at  1-30,  n-6o,  desks 
and  tables  $1,789,  bookcases  and  cabinets  $680,  office  supplies  $348;  sold  Sun-, 
dry  Customers,  at  n~3O,  desks  and  tables  $1,100,  bookcases  and  cabinets  $860, 
office  supplies  $350;  paid  note  No.  96,  $930.78  with  interest  $9.31.  October  25, 
A.  J.  Scobey,  A.  K.  Ladd,  and  J.  B.  Gaynor  paid  the  balance  on  their  subscrip- 
tions $13,167.50;  October  26,  bought  from  Brickley  Desk  Co.,  at  2-10,  n~3O, 
tables  and  desks  $6,240,  bookcases  and  cabinets  $3,780;  paid  B.  F.  Brainard 
&  Co.  bill  of  9-26  $11,035  less  $100.35;  R-  M.  Goddard  Furniture  Co.  made  us 
an  allowance  on  purchase  of  10-16  of  $200  on  desks  and  $150  on  cabinets  due 
to  latent  defects.  October  27,  paid  Kistler  Stationery  Co.  bill  of  10-1  $150. 
October  30,  sold  Jno.  Bach  &  Sons,  at  2-10,  n~3O,  tables  and  desks  $1,465,  book- 
cases and  cabinets  $456,  office  supplies  $435;  sold  Sundry  Customers,  at  n~3O, 
desks  and  tables  $1,800,  bookcases  and  cabinets  $620,  office  supplies  $300;  cash 
sales  for  the  month  were  desks  and  tables  $3,500,  bookcases  and  cabinets  $2,832.60, 
office  supplies  $3,167.40;  office  supplies  used  by  the  office  $350;  payroll  check 
on  Building  Fund  carried  $1,950.70  for  excavating  and  foundation  labor,  Noble 
$200  salary,  Builder  $350  commission;  paid  Hoboken  City  Hospital  $50  bill  for 
workmen  injured  during  construction;  paid  payroll,  salesmen's  salaries  $2,650, 
salesmen's  commission  $580,  salesmen's  travelling  expense  $1,525.50,  delivery 
men  $250,  receiving  and  shipping  clerks  $163.50,  office  salaries  $600;  N.  Y.  C. 
Ry.,  freight-in  $631.72;  N.  Y.  Paper  Co.  for  sundry  office  expense  $84.75:  Ward 
&  Gow  Publicity  Co.  for  advertising  $280  and  sundry  selling  expense  $50.25; 
petty  cash  voucher  $144.95  of  which  $50.75  was  for  telegraph,  telephone,  and 
postage,  $5  to  Bullinger  Publicity  Co.  for  entry  in  city  directory,  $62.50  for 
stationery  and  printing,  $10  for  credit  information  to  R.  G.  Dunn  and  Co., 
$16.70  for  sundry  office  expenses;  paid  the  Builders  Testing  Laboratories  $50 
for  test  of  cement  and  concrete  for  use  in  factory  construction ;  paid  J.  P.  Landown 
rent  10-15  to  11-15  $25o;  Sundry  Customers  returned  tables  $150,  bookcases 
$85,  and  sundry  office  supplies  of  $52.50  of  their  purchase  of  10-24  as  not  being 
what  they  had  ordered;  we  returned  bookcases  $500  to  the  Brickley  Desk  Co. 
of  our  purchase  of  10-26,  because  of  failure  of  patent  doors  to  operate. 


X 

PRACTICE  DATA 

Close  the  Cash  Book,  Journal,  Sales  Register,  and  Voucher  Record,  post  and 
take  a  trial  balance  as  of  October  30.  When  posting,  make  the  Customers  Ledger 
self-balancing  and  take  a  trial  balance  of  it.  Verify  the  Vouchers  Payable  bal- 
ance against  the  Voucher  Record. 

Make  the  following  detailed  entries  for  transactions  with  customers  and  credi- 
tors under  the  dates  given: 

November  2,  Field,  Marshall  &  Co.  gave  their  note  for  I  year  at  6%  for  $3,571.05 
in  payment  of  invoices  of  7-6,  9-24,  and  balance  6-15;  gave  P.  J.  Johnson  Mills 
Co.  our  note  at  6  mos.  for  $1,462.59  including  $66.99  interest  to  date  at  6%  for 
balance  of  bill  of  1-15  $1,395.60.  November  3,  Kistler  Stationery  Co.  honored 
our  sight  draft  for  $1,250  payment  of  bills  of  4-18  and  6-15. 

November  4,  wrote  B.  F.  Brainard  &  Co.  claiming  a  $10  adjustment  on  account 
of  overpayment  on  October  26  of  bill  of  9-26,  on  which  the  discount  allowed 
was  $110.35.  November  5,  paid  Jackson  City  Supply  Co.  bill  of  10-6  $3,028.95 
less  $30.29  discount;  gave  Brickley  Desk  Co.  our  note  for  $9,329.60  at  4  mos.  at 
6%  for  bill  of  10-26  $10,020  less  $190.40  discount  and  credit  memo  of  10-30 
for  $500.  November  6,  Field,  Marshall  &  Co.  wrote  stating  that  our  monthly 
statement  of  account  to  them  carried  a  charge  for  10-24  of  $2,817  whereas  their 
bill  of  that  date  carried  $2,310.  An  investigation  showed  their  contention  correct, 
the  error  being  due  to  a  transposing  of  charges  between  them  and  Sundry  Customers 
for  sales  on  10-24  when  the  Sales  Register  entry  was  made.  The  error  was 
corrected  and  correct  statements  were  sent  out.  The  Brush  Co.  paid  their  bill  of 
5-20  $825.  November  7,  received  credit  memo  from  B.  F.  Brainard  &  Co.  for  $10 
in  reply  to  letter  of  November  4.  November  10,  Kistler  Stationery  Co.  gave  their 
note  for  6  mos.  at  6%  for  $2,826.95  payment  of  bill  of  10-9.  November  12,  Jno. 
Bach  &  Sons  paid  their  bill  of  10-30,  $2,356,  less  $47.12;  Saxon  Edwards  paid 
their  bill  of  5-23  $206.75  and  balance  on  2-10  $85;  paid  B.  F.  Brainard  &  Co. 
bill  of  7-11  $802.15  less  credit  memo  of  11-7  $10.  November  15,  paid  R.  M. 
Goddard  Furniture  Co.  bill  of  10-16  $18,677,  less  credit  memo  of  10-26  for  $350 
and  discount  of  $183.27;  C.  F.  Hoeckle  Office  Supply  Co.  paid  their  bill  of  10-12 
$2,485  less  $24.85  discount.  November  18,  Alexander  Jacobs  paid  their  bill  of 
10-15  $2,707.85  less  $27.08  discount.  November  21,  Saxon  Edwards  paid  their 
bill  of  9-21  $2,393.05.  November  24,  Sundry  Customers  paid  their  bill  of  10-24 
$2,529.50.  November  25,  Field,  Marshall  &  Co.  paid  their  bill  of  10-24  $2,310 
less  $23.10  discount.  November  27,  T.  C.  Macie  &  Co.  gave  their  note  for  $775.25 
in  payment  of  bills  of  5-11,  6-21,  and  7-8.  November  30,  Sundry  Customers 
paid  their  bill  of  10-30  $2,720;  C.  F.  Hoeckle  Office  Supply  Co.  paid  their  bill 
of  7-18  $123.90  and  balance  on  3-12  $250.  December  4,  paid  Jackson  City 
Supply  Co.  $1,050.20  for  bills  of  6-25  and  7-18.  December  9,  Smith  Brooks 
Stationery  Co.  gave  their  note  for  $873.15  including  interest  $23.15  on  unpaid 
bills  for  their  bills  of  6-24  and  7-7.  December  13,  T.  J.  Stewart  Office  Specialties 
Co.  honored  sight  draft  for  bill  of  8-12  $523.12.  December  17,  offered  Field, 
Marshall  &  Co.  a  discount  of  $71.05  from  the  face  of  their  note  of  11-2  if  they 


would  pay  $2,000  cash  and  give  a  new  note  for  $1,500  for  the  balance.  Offer  was 
accepted  and  cash  and  new  note  for  $1,500  received  on  December  20.  (In  making 
adjustment  on  our  books,  take  account  of  accrued  interest  on  old  note  of  $26.79.) 
December  18,  paid  F.  C.  Good  Rubber  Co.  bill  of  7-1,  $175.19.  December  20, 
paid  our  note  No.  95,  $1,261.40,  with  $25.23  interest,  held  by  the  Brickley  Desk 
Co.  December  23,  honored  B.  A.  Franklin  Press  draft  at  sight  for  bill  of  6—22 
$262.15.  Bank's  statement  of  account  showed  charges  of  $1.25  and  75c  respec- 
tively for  collection  of  Kistler  Stationery  Co.  draft  of  11-3  and  T.  J.  Stewart 
Office  Specialties  Co.  draft  of  12-13. 


XI 
PRACTICE  DATA 

The  following  transactions  took  place  during  the  year  and  are  to  be  entered 
as  of  the  given  date. 

Due  to  lack  of  floor  space  in  the  sales  department  and  the  necessity  of  carrying 
a  large  assortment  of  styles  in  stock  at  all  times,  on  January  2,  1910,  a  warehouse 
was  rented  nearby  for  a  monthly  rental  of  $100  payable  in  advance.  Under 
date  of  September  i,  1910,  enter  a  payment  of  $900.  The  surplus  stock  was 
removed  thereto  and  insured  January  3  for  I  year  at  a  cost  of  $250. 

The  receiving  and  shipping  room  quarters  were  also  removed  to  the  ware- 
house. On  March  I,  a  portion  of  the  warehouse  was  sublet  at  a  monthly  rental 
of  $40  payable  in  advance.  Enter  a  receipt  of  $280  under  date  of  September  I, 
1910.  Services  of  A.  Pinkerton  for  $20  a  month  beginning  March  I  were  secured 
to  watch  store,  warehouse,  and  factory.  Record  on  August  31,  1910,  a  payment 
of  $120. 

On  February  I,  the  accrued  taxes  of  $75  at  date  of  purchase  of  factory  site 
were  paid. 

August  15,  1910,  the  factory  building  was  completed.  The  following  expendi- 
tures had  been  made:  For  steel,  concrete,  brick  and  other  materials  $15,740.20; 
for  labor  of  all  sorts  $11, 579.35;  for  insurance,  injuries  incurred  during  construc- 
tion, legal  expense  in  defense,  and  interest  on  moneys  borrowed  for  the  building 
fund  $750;  J.  T.  Noble's  salary  $2,000  paid  and  $100  accrued;  I.  M.  Builder's 
fees  and  commission  $1,113.51;  and  Builders  Testing  Laboratories  $250.  The 
factory  was  largely  of  concrete  and  numerous  tests  were  necessary.  Several 
purchases  of  cement  had  been  returned  as  not  being  of  the  required  standard. 
The  company's  note  for  $10,000  had  been  discounted  for  $9,800  and  the  pro- 
ceeds placed  in  the  Building  Fund  to  finance  the  undertaking.  The  $200  dis- 
count is  included  in  the  $750  mentioned  above.  Noble  reported  that  orders  for 
machinery  and  equipment  had  been  placed  with  Sundry  firms  and  that  about 
three  months  would  be  required  before  the  machinery  could  be  placed  and  ready 
for  operation  as  some  of  the  machines  were  of  delicate  and  complex  construction 
and  would  require  careful  testing  before  acceptance.  He  suggested  that  orders 
for  the  raw  materials  used  in  the  manufacture  of  the  protectograph  be  now 
placed  to  take  advantage  of  a  low  market.  Accordingly  $10,000  worth  was 
ordered  from  the  New  Method  Mdg.  Co.,  an  advance  payment  of  $2,500  being 
made  on  August  25  and  charged  to  Trade  Debtors,  the  balance  to  be  paid  when 
delivery  is  made,  not  earlier  than  October  31.  It  was  decided  to  close  out  the 
division  of  Sundry  Office  Supplies  and  dispose  of  the  balance  on  hand  October 
31  at  a  lump  sum. 

June  15,  the  Boston  Office  Co.  sent  $5,000  of  office  specialties  to  be  sold  on  a 
5%  commission  basis  for  their  account. 

July  i,  a  statement  of  affairs  was  received  from  Jno.  Bach  &  Sons  showing 
their  insolvency  and  copy  of  an  agreement  signed  by  several  creditors  to  accept 
settlement  of  all  claims  on  a  40%  basis.  Your  attorney,  having  been  unable  to 
collect  and  having  investigated,  advised  the  acceptance  by  you  of  their  offer. 


Accordingly  on  July  27,  a  check  was  received  from  Bach  &  Sons  for  40%  of  the 
balance  as  shown  by  your  books.  (Charge  Jackson,  Edwards,  Hanson  with  60% 
of  $169.36,  the  part  guaranteed  by  them,  and  Reserve  for  Doubtful  Accounts 
with  60%  of  $256.25.) 

March  I,  on  account  of  the  flourishing  condition  of  the  sales,  an  interim  divi- 
dend of  4%  was  declared  and  paid.  Noble's  was  applied  as  a  partial  payment 
on  his  stock  note. 


XII 
PROBLEM 

On  November  15,  1914,  Isaac  Cohen  &  Co.  Ltd.,  sent  for  sale  on  their  account 
a  consignment  of  goods  valued  at  $5,000  to  John  Stimson  &  Sons,  factors  of 
Boston,  sale  to  be  on  a  5%  basis  with  i%  additional  for  guaranty  of  collection 
of  accounts.  Prepaid  freight  amounted  to  $25.40.  December  26,  an  account  sales 
from  Stimson  &  Sons  showed  sales  of  $5,775.20  and  expenses  in  connection 
therewith,  exclusive  of  commission  and  guaranty,  of  $42.25.  The  net  proceeds 
were  placed  to  Cohen  &  Co.'s  credit,  subject  to  sight  draft. 

1.  Show  all  the  accounts  affected  on  Cohen  &  Co.'s  books  in  order  to: 

a.  Show  the  profit  or  loss  on  this  consignment. 

b.  Include  the  profit  or  loss  with  their  regular  sales. 

2.  Stimson  &  Sons  fiscal  year  ended  November  30.   On  November  25  they 
had  sold  one-fourth  of  the  Cohen  &  Co.  consignment  for  $1,500  and  had  incurred 
the  expenses  of  $42.25  mentioned  above  but  applicable  to  the  whole  consignment. 
Show  Stimson  &  Sons'  accounts  affected  properly  closed. 


XIII 
PRACTICE  DATA 

In  addition  to  the  special  data  given  in  XII,  the  following  transactions  in  due 
course  took  place. 

Make  the  record  as  of  August  31,  1910  with  summary  entries. 

SALES  JOURNAL:  Sales  to  Sundry  Customers  were:  Desks  and  Tables  $200,- 
670.20,  Bookcases  and  Filing  Cabinets  $153,803.40,  and  Sundry  Office  Supplies 
$16,115.26.  Return  Sales  and  Allowances  were:  Desks  and  Tables  $4,240.15. 
Bookcases  and  Filing  Cabinets  $4,250.65,  and  Sundry  Office  Supplies  $675.50. 
Cash  Sales  were:  Desks  and  Tables  $35,000,  Bookcases  and  Filing  Cabinets 
$21,500,  and  Sundry  Office  Supplies  $2,825.15.  Included  in  this  last  item  is  the 
$250  stationery  referred  to  under  "Journal"  below  as  drawn  from  stock. 

CASH  BOOK:  Received:  from  Cash  Sales  as  above;  from  Sundry  Customers 
$269,359.50  less  Sales  Discount  of  $3,940.20;  from  Notes  Receivable  $5,000; 
from  Notes  Payable  discounted  $42,500  less  $350  discount;  from  Notes  Receiv- 
able discounted  $15,000  less  discount  of  $50.  Disbursed  for  Vouchers  Payable 
$359,720.40. 

JOURNAL:  Gave  our  notes  to  Sundry  Creditors  for  $8,500;  received  notes  from 
Sundry  Customers  $25,200.50;  notes  receivable  discounted  were  paid  by  makers 
at  maturity  $10,250;  Stationery  was  drawn  from  stock  $250  and  used  for  adver- 
tising purposes. 

VOUCHER  REGISTER.  Bought  Desks  and  Tables  $99,842.95,  Bookcases  and 
Filing  Cabinets  $73,758.15,  and  Sundry  Office  Supplies  $12,684.40.  Purchases 
discount  was  $2,153.40;  In  freight  and  delivery  $3,740.28;  Receiving  and  Ship- 
ping Room  Expense  $2,690.14;  Heat,  Light  and  Power  $725.16;  Salesmen's 
Salaries  $65,840.20;  Salesmen's  Commissions  $20,730.30;  Travelling  Expenses 
$42,420.70;  Advertising  $12,280;  Sundry  Selling  Expense  $940.03;  Delivery  Ex- 
pense $7, 280.90;  Warehouse  Expense  $50;  Office  Salaries  $11, 600;  Stationery  and 
Printing  $450;  Collection  and  Exchange  $30.05;  Interest  and  Discount  $1,096.27; 
Sundry  Office  Expense  $72.15;  Telephone,  Telegraph,  and  Postage  $475.03; 
Notes  Payable  $47,250.19;  Rent  $3,250;  Power  Equipment  $5,000;  Taxes  $160.15; 
Noble's  salary  for  August  $200.  (Charge  $100  to  Factory  Building  and  $100  to 
Power  Equipment.) 


XIV 
PRACTICE  DATA 

Summarize  the  various  books  and  post  completely. 


XV 

PRACTICE  DATA 
Take  a  trial  balance  of  the  General  and  Customers  Ledgers. 


XVI 
PROBLEM 

From  the  following  trial  balance  and  adjustment  data  for  the  Excelsior  Trad- 
ing Co.  prepare  a  statement  of  income  and  balance  sheet  as  of  December  31,  1914: 

Cash  $15,324.00 

Land  260,000.00 

Buildings  350,000.00 

Furniture  and  Fixtures: 

Store  25,430.00 

Office  5,201.00 

Delivery  Equipment  45,000.00 

Notes  Receivable  35,812.00 

^Totes  Receivable  Discounted  10,000.00 

Accounts  Receivable  163,374.00 

Investments  20,000 .  oo 

Salesmen's  advances  1,960.00 

Organization  Expense,  $15,000  less  2%  14,700.00 

Good  Will  200,000.00 

Notes  Payable  22,000.00 

Accounts  Payable  78,5 1 1 .  oo 

Mortgage  on  Land  and  Buildings  55,000.00 

Special  Accounts  Payable  61363 .  oo 

Reserve  for  Doubtful  Accounts  3%  298.90 

Reserve  for  depreciation  buildings  2^%  8,750.00 

Reserve  for  depreciation  delivery  equipment  20%  9,000.00 

Reserve  for  depreciation  furniture  and  fixtures  10%  3.063 . 10 

Capital  Stock  1,000,000.00 

Sales  less  returns  and  allowances  1,240,600.00 

Rent  of  part  of  business  premises  500 .  oo 

Inventory  Dec.  31,  1913  104,621.00 

Purchases  including  in-freight  and  cartage  996,062 .  oo 

Office  Salaries  75,120.00 

Salesmen's  Salaries  60,440.00 

Advertising  50, 300 .  oo 

Taxes  4,020.00 

Insurance  2,600.00 

Interest  and  Discount  6,500.00 

Repairs  and  Maintenance: 

Buildings  20,042 .  oo 

Delivery  Equipment  6,900.00 

Surplus  60,070 .  oo 

Sundry  Office  Expenses  1 5 , 500 .  oo 

Sundry  Selling  Expenses  14,250.00 


$2,493,156.00    $2,493,156.00 


Inventory  December  31,  1914  $270,560.00 

Salesmen's  Salaries  accrued  5,750.00 

Unexpired  Insurance  912.00 

Advertising  prepaid  1 ,300 .  oo 

Taxes  accrued  5 1 2 .  oo 

Interest  accrued  on  investments  125.00 

Write  off  2%  of  the  Organization  Expense,  make  the  same  reserves  for  depre- 
ciation and  doubtful  accounts  as  for  the  preceding  year;  take  into  account  an 
item  charged  to  buildings  maintenance  and  repairs  of  $2,500  which  was  a  build- 
ings' betterment. 


XVII 
PRACTICE  DATA 

Close  the  books,  by  journal  entry,  for  the  fiscal  year  ending  August  31,  1910, 
taking  account  of  the  following  adjustments  and  inventories: 
Rent  Income  received  in  advance,  $40. 
Warehouse  rent  paid  in  advance,  $100. 
Interest  accrued  on  notes  receivable,  $50. 
Salesmen's  Salaries  accrued,  $420. 
Salesmen's  Commissions  accrued,  $125. 
Advertising  bills  unpaid,  $100. 
Advertising  paid  in  advance,  $250. 
Stationery  on  hand,  $50. 

Insurance:    first  policy,  one  year,  bought  10-1,  cost  $125,    1/12  unexpired 
$10.04;  second  policy,  one  year,  bought  1-2,  cost  $250,  4/12  unexpired  $83.33. 
Taxes  for  the  year  1910,  estimated  $565.42,  2/3  used  $376.95. 
Purchases  Discount  not  yet  taken  advantage  of  on  unpaid  vouchers  $475. 
The  Knoxfraud  patent  had  15  years  to  run  when  purchased. 
Write  off  1/15  of  its  value,  it  being  the  policy  of  the  company  to  maintain 
an  experimental  laboratory  and  so  overcome  any  possible  supersession. 
Write  off  Organization  Expense  and  Good  Will  5%  each. 
Create  reserves  for:   Furniture  and  Fixtures  10%. 
Delivery  Equipment  15%. 
Doubtful  Accounts,  3%  on  Trade  Debtors  and  2%  on 

Notes  Receivable. 

Take  no  account  of  depreciation  on  Factory  Building  or  Power  Equipment. 
Inventories  of  Stock-in-trade: 

Desks  and  Tables  $4,943 . 86 

Bookcases  and  Filing  Cabinets  1,521 .31 

Sundry  Office  Supplies  3,197.20 

—       $9,662.37 
In-freight  and  delivery:  charge  $2,500.00  to  Desks  and  Tables  purchases 

2,100.00  to    Bookcases    and    Filing    Cabinets 

purchases 

297 . 69  to  Sundry  Office  Supplies  purchases 
Light,  Heat  and  Power:  charge  3/4  to  Selling 

i  /4  to  General- Administrative 
Receiving  and  Shipping  Room:  charge  3/4  to  shipping 

i  /4  to  receiving,  of  which 
50%  to  Desks  and  Tables 
45%  to  Bookcases  and  Filing  Cabinets 

5%  to  Sundry  Office  Supplies 
Rent:  charge  4/5  to  Selling 

1/5  to  General-administrative 
Insurance:  charge  $335.24  to  Selling 

41.75  to  General-Administrative 

Taxes:  charge  all  of  the  1909  taxes  ($160.15)  to  Surplus 
Discount  on  Stock:  charge  to  Factory  Buildings 


XVIII 
PRACTICE  DATA 

Draw  up  statements  for  the  year,  the  Income  statement  to  be  supported  by 
a  condensed  statement  showing  percentages  of  cost  of  sales,  gross  profit,  selling 
expense,  general  and  administrative  expense,  and  net  profit. 


XIX 
PRACTICE  DATA 

The  results  for  the  year  proving  very  unsatisfactory  in  comparison  with  the 
volume  of  business  transacted,  N.  G.  Goodfigure  was  retained  to  make  an  audit 
of  the  year's  operations  in  an  effort  to  locate  the  trouble.  In  his  report  cover- 
ing the  audit,  he  called  attention  to  the  following  items: 

1.  In  the  Trade  Debtors  are  included  two  charges,  viz.  advances  to  salesmen 
$500  and  prepayment  on  purchases  $2,500  which  are  in  no  sense  charges  to 
customers. 

2.  In  the  Notes  Receivable  is  included  Noble's  note  given  in  payment  of  the 
balance  on  his  subscription  to  capital  stock  $1,000  but  now  reduced  to  $600 
through  the  application  of  his  March  dividend  as  a  partial  payment.   This  does 
not  belong  in  the  Notes  Receivable  account. 

3.  There  is  no  record  on  the  books  of  the  Boston  Office  Co.  consignment  re- 
ceived on  6-i5~'io.   Investigation  showed  that  on  7-2  a  sale  of  $4,500  was  made 
from  the  consignment  and  the  balance  was  included  in  your  Sundry  Office  Sup- 
plies inventory,  being  there  valued  at  $1,000.    It  was  ascertained  that  the  freight 
and  cartage  paid  on  the  incoming  consigned  goods  amounted  to  $25.12  and  had 
been  charged  to  your  own  In-freight  and  Cartage  account. 

4.  The  inadequacy  of  the  purchases  system  was  shown.    Perhaps  due  to  the 
fact  that  during  the  year  your  main  stock  was  withdrawn  from  the  store  and 
the  immediate  supervision  of  the  responsible  head  and  placed  in  the  warehouse, 
the  stock  had  been  allowed  to  run  down  so  that  it  amounted  at  the  close  of  the 
year  to  only  $9,662.37 — correct  value  being  $8,662.37  when  allowance  for  the  in- 
clusion of  the  Boston  Office  Co.  consigned  goods  was  made — as  compared  with 
$42,282.27  on  hand  at  the  beginning.   Suggestion  for  the  installation  of  a  dis- 
tinct purchasing  department  and  the  introduction  of  a  stock  record  was  made  in 
order  to  keep  track  of  the  condition  of  the  stock. 

5.  The  depreciation  of  Good  Will  is  to  be  reversed. 

6.  The  discount  on  capital  stock,  charged  to  Factory  Building,  is  to  be  taken 
out  and  shown  as  a  separate  item  under  its  own  name. 

7.  An  analysis  of  the  sales  developed  that:  on  Desks  and  Tables  Sales  gross 
profit  was  47%  and  rate  of  turnover  was  9  +  ;  on  Bookcases  and  Filing  Cabinets 
gross  profit  was  38%  and  turnover  6.4+  and  on  Sundry  Office  Supplies  a  gross 
loss  of  17+%  was  sustained  and  the  turnover  was  only  3+.  Taken  as  a  whole, 
the  selling  expense  was  too  high,  very  probably  due  to  an  abnormal  salesmen's 
travelling  expenses  and   commissions.   The   present  commissions'   policy   was 
severely  condemned  as  tending  to  an  increase  of  sales  without  regard  to  the 
financial  standing  of  the  customer.   For  the  purpose  of  establishing  a  consistent 
policy  of  passing  on  credits  and  following  up  collections,  the  installation  of  a 
department  of  Credits  and  Collections  was  advised. 

8.  It  was  advised  that  the  Petty  Cash  be  taken  out  of  the  bookkeeper's  control. 

9.  Of  the  1909  taxes  charged  to  Surplus,  one-third  should  have  been  charged 
to  Profit  and  Loss. 

Make  all  of  the  entries  necessary  to  adjust  the  books  in  accordance  with  the 


auditor's  suggestions.  Post,  close,  and  draw  up  corrected  statements  including 
the  adjustments  to  Surplus,  supporting  the  Income  statement  with  a  schedule 
showing  cost  of  sales  and  gross  profit  by  departments  and  percentages  of  gross 
profit. 


XX 
PRACTICE  DATA 

September  10,  1910  a  one-year  »fire  insurance  policy  covering  factory  building 
and  equipment  was  bought  from  the  Northwestern  Fire  Insurance  Co.  for  $584.68. 

At  a  meeting  of  the  directors  and  stockholders  for  the  purpose  of  reviewing 
Goodfigure's  report  and  forecasting  a  policy  for  the  coming  year  the  following 
items  were  thoroughly  considered: 

1.  In  order  to  pursue  a  vigorous  sales  policy  such  as  would  now  be  necessary 
and  along  the  lines  suggested  by  Goodfigure,  immediate  purchases  in  large 
amounts  would  have  to  be  made. 

2.  The  company's  credit,  at  the  present  time,  with  more  than  $70,000  of  cur- 
rent payables  outstanding,  would  not  bear  further  expansion.    Ready  funds  of 
at  least  $20,000  would  have  to  be  provided  within  the  next  month  to  take  up 
outstanding  notes  and  the  more  pressing  bills,  to  say  nothing  of  the  amount 
needed  to  take  advantage  of  all  discounts  offered  on  new  purchases. 

3.  The  contracts  entered  into  for  purchases  of  machinery  and  raw  materials 
would  soon  have  to  be  fulfilled  requiring  an  additional  sum  of  $20,000  or  $25,000. 

4.  In  view  of  the  policy  previously  decided  upon  to  close  out  the  division  of 
Sundry  Office  Supplies  on  October  31  and  push  with  vigor  the  new"  knoxfraud, 
a  wide-spread  advertising  campaign  was  decided  upon  for  the  next  six  months  in 
order  fully  to  present  the  need  for  the  new  device  and  its  merits.    It  was  estimated 
that  $15,000  or  $20,000  would  be  needed  for  this. 

5.  The  absolute  necessity  for  additional  capital  was  apparent.    Before  the 
company  could  hope  successfully  to  secure  subscriptions  to  a  new  issue  of  stock, 
not  only  would  that  stock  have  to  be  made  attractive,  but  the  company's  con- 
dition as  to  surplus  would  have  to  be  improved.   Accordingly,  it  was  voted  to 
donate  10%  of  the  capital  stock  into  the  treasury  and  offer  it  for  sale  first  to 
the  present  stockholders  and  then  to  the  public  at  not  less  than  90.   Then  it  was 
ordered  that  the  capital  stock  be  increased  by  the  issuance  of  $50,000  of  First 
Preferred  6%  cumulative  and  $25,000  of  Second  Preferred  8%  non-cumulative, 
both  classes  of  stock  to  have  further  participation  on  the  following  basis: 

In  the  event  of  dividends  in  excess  of  the  requirements  for  the  preferred  stock 
and  6%  on  the  common,  the  first  preferred  should  share  1-3  and  the  common  2-3 
of  such  excess  for  an  additional  dividend  until  they  should  have  received  in  all 
an  8%  dividend  and  so  be  placed  on  an  equality  with  the  second  preferred.  Of 
all  further  dividends  the  common  was  to  share  3-4  of  the  amount  of  such  excess 
dividends  and  the  two  preferred  classes  the  other  1-4  distributable  between  them 
in  the  ratio  which  the  amount  of  each  outstanding  bore  to  the  total  of  both 
classes  outstanding. 

The  necessary  legal  requirements  for  increasing  their  capital  having  been  met, 
the  present  stockholders  took  all  the  treasury  stock  at  90  and  the  two  classes  of 
preferred  were  entirely  subscribed  for  at  par,  payable  y*  down  and  the  remainder 
subject  to  two  equal  calls  at  the  end  of  4  and  8  months  respectively.  Cash  on 
account  of  treasury  stock  and  the  preferred  was  received  as  indicated. 


Make  the  entries  to  record  the  above  data  under  date  of  October  25,  1910. 
(Charge  the  discount  on  stock  against  the  surplus  received  from  donation). 
Transfer  the  cash  balance  in  the  Building  Fund  into  the  General  Cash,  there 
being  no  longer  any  need  of  the  separation. 


XXI 

PROBLEM 

The  Colorado  Rock  Drill  Co.  authorized  the  issue  of  $100,000  of  6%  cumu- 
lative preferred  stock  callable  by  lot  in  amounts  as  follows: 

$10,000  at  the  end  of    5  years  at  107  in  cash 

$10,000  at  the  end  of    7  years  at  106  in  cash 

$15,000  at  the  end  of  10  years  at  105  in  cash 

$15,000  at  the  end  of  12  years  at  104  in  cash 

$50,000  at  the  end  of  20  years  at  par  in  cash  or  convertible  into  the  company's 
common  stock  at  the  option  of  the  company.  The  entire  issue  was  sold  for  cash 
at  103. 

Set  up  the  accounts  showing  the  handling  of  all  redemption  transactions  at 
the  five  periods  above  referred  to,  with  these  additional  facts:  it  is  the  expecta- 
tion of  the  company  to  provide  for  a  permanent  increase  in  capital  of  $100,000, 
the  amount  of  the  preferred  stock  issue,  during  the  life  of  the  issue;  and  at  the 
end  of  the  20  years,  the  company  exercises  its  option  by  converting  $30,000  of 
the  preferred  into  common  stock  out  of  unissued  common  to  that  amount  held 
in  the  treasury. 


XXII 
PRACTICE  DATA 

By  October  31  all  of  the  Sundry  Office  Supplies  had  been  closed  out  for  $2,000 
cash. 

The  raw  materials  contracted  and  partially  paid  for  on  August  25,  were  re- 
ceived and  on  November  10,  a  check  for  the  balance  due  less  2%  discount  on 
the  contract,  was  sent  to  the  New  Method  Mfg.  Co.  (Be  sure  to  book  the  proper 
charge  to  Raw  Materials.)  Materials  were  insured  for  I  year  at  a  cost  of  $175. 

On  November  30,  the  last  of  the  machinery  was  received  from  the  Harvey 
Machine  Mfg.  Co.  and  installed.  The  invoice  cost  was  $15,000  of  which  $12,000 
was  paid  in  cash  and  the  company's  note  secured  by  mortgage  was  given  for 
the  balance.  In-freight  and  delivery  on  the  machinery  amounted  to  $675.40  and 
placement  expense,  not  including  concrete  platforms  and  piers  which  had  been 
charged  to  the  building  at  a  cost  of  $750,  amounted  to  $225.  Noble's  salary 
for  the  three  months  while  passing  upon  and  superintending  the  placing  and 
erection  of  machinery  was  charged  $400  to  machinery  and  $200  to  power  equip- 
ment. The  additional  expenditure  of  connecting  the  machinery  with  the  power 
— including  shafting,  belting,  labor,  etc. — amounted  to  $550.50.  December  2 
an  insurance  policy  for  I  year  covering  machinery  was  purchased  for  $275.40 
from  the  New  Jersey  Mutual. 

Full  factory  operations  were  commenced  on  December  I  and  orders  were 
taken  for  knoxfrauds  for  delivery  beginning  with  the  first  of  the  year.  It 
was  determined  to  extend  the  current  fiscal  period  and  not  close  the  books  until 
December  31,  1911.  The  advertising  campaign  was  producing  results  so  that  to 
fill  orders  the  factory  had  to  work  two  shifts  of  men  beginning  with  March  I. 
As  a  result  of  seeming  prosperity  and  a  discontent  engendered  by  labor  leaders 
who  had  recently  unionized  the  works,  a  demand  for  a  15%  increase  in  wages 
was  made  and  refused,  resulting  in  a  walk-out  on  March  30.  A  patrol  against 
strike  breakers  was  established  on  April  2  after  about  one-third  of  the  full  com- 
plement of  workers  needed  for  operation  had  been  secured.  Some  of  these  de- 
fected and  the  rest  were  quartered  in  the  shops  to  prevent  violence.  After  three 
weeks  of  partial  operation  at  an  increased  expense  of  $1,500  directly  attributed 
to  the  strike,  one  of  the  boilers  exploded  damaging  the  building  and  equipment, 
the  resulting  fire  consuming  supplies  and  damaging  raw  materials.  An  investi 
gation  placed  the  blame  on  a  half-crazed  workman  whose  sympathies  were  with 
the  strikers.  Hospital  fees  for  injured  workmen  amounted  to  $500.  (Record 
these  two  items  as  cash  expenditures  for  the  purposes  named  under  date  of 
April  20.)  The  insurance  companies  settled  the  losses  as  follows:  the  building 
and  the  power  equipment  on  which  the  estimated  damage  was  $3, 500  were  placed 
in  complete  repair;  the  estimated  damage  on  materials,  determined  after  an 
inventory  and  comparison  with  stock  records,  amounted  to  $4,000  and  was 
covered  by  $3,200  insurance  which  was  paid — in  making  the  estimate  scrap 
value  of  damaged  goods  was  placed  at  $1,000  but  only  realized  $750  when  sold; 
machinery  costing  $3,500,  with  a  scrap  value  of  $500,  realized  on  sale  by  the 
company  $650,  the  insurance  received  being  $2,000.  (On  the  machinery  81-3% 


annual  depreciation  is  to  be  taken  into  account  and  the  portion  of  the  unexpired 
insurance — roughly  estimated  at  $150 — now  cancelled  by  the  payment  of  the 
insurance  on  both  raw  materials  and  machinery  is  to  be  considered  in  making 
charges  to  the  Fire  Loss  account.)  Additional  loss  and  expense  due  to  decreased 
production  and  cancellation  of  orders  because  of  not  being  able  to  deliver  goods 
when  promised  was  estimated  at  $7,500.  The  strike  was  finally  settled  by  grant- 
ing a  5%  increase  in  wages. 

The  directors  had  under5  consideration  the  incorporation  with  the  knox- 
fraud  of  a  patent  listing  and  adding  device  owned  by  J.  Q.  Osgood.  In  view 
of  the  need  of  some  additional  capital  anyway  due  to  the  strike  losses,  it  was 
decided  to  incorporate  the  new  device  now  since  it  would  be  easier  to  make 
the  needed  changes  at  this  time  than  after  operations  had  been  resumed.  Accord- 
ingly a  rearrangement  of  the  machinery  was  necessary  to  make  room  for  the 
new  machinery  and  place  it  for  proper  routing  of  the  product.  This  entailed 
an  expenditure  of  $750  for  the  rearrangement  and  $5,500  for  new  machines  to 
replace  those  disposed  of  and  to  manufacture  the  new  device.  (Make  the  record 
as  of  April  30.)  The  contract  entered  into  with  Osgood  was  on  a  royalty  basis 
per  unit  turned  out  by  the  machines  and  for  one  year's  time  beginning  May  I. 
The  directors  decided  on  a  continuation  of  the  advertising  campaign.  To  pro- 
vide funds  for  these  purposes  a  bond  issue  was  determined  upon — $20,000, 
20  year,  6%,  interest  coupons  redeemable  November  I  and  May  I — secured  by 
mortgage  on  the  factory  and  its  equipment.  The  trust  agreement  provided  for 
the  payment  at  the  close  of  each  fiscal  year  of  $750  out  of  profits  into  the  hands  of 
the  Guaranty  &  Trust  Co.  for  investment  in  securities  until  a  sinking  fund  suf- 
ficient to  retire  the  bonds  at  their  maturity  shall  have  been  established.  $15,000 
of  the  bonds  were  offered  for  sale  and  were  purchased  at  95  for  cash  except  one 
purchase  on  a  note  for  $950.  The  remaining  $5,000  were  held  in  the  treasury 
until  needed. 

Record  the  above  transactions  as  of  the  dates  given — the  bond  transactions 
took  place  on  May  I. 

j 


XXIII 
PRACTICE  DATA 

The  remaining  data  for  the  16  months  ending  December  31,  1911,  have  been 
summarized  in  most  instances  and  were  as  follows:  (In  making  record,  use  the 
dates  given  or  December  31,  where  none  are  given.) 

September  2,  1910  the  remainder  of  the  Boston  .Office  Co.  consignment  was 
sold  for  $1,250  cash  and  a  check  sent  them  for  the  balance  due.  Desks  and  tables 
$575  and  filing  cabinets  $250  were  taken  from  stock  for  use  in  the  factory.  Addi- 
tional benching  and  racks  were  bought  for  $450  cash.  Shop  and  hand  tools  cost 
$875-25. 

June  i,  1911  a  dynamo  costing  $525  was  sold  for  $415  and  a  larger  one  pur- 
chased from  the  General  Electric  Co.  at  a  cost  of  $975.50  installed.  (Take  into 
account  depreciation  at  I2>£%  per  annum.)  Additional  motor  trucks  were 
purchased  from  the  New  Model  Truck  Co.  for  $1,790.  (Entry  was  made  at 
$1,740,  taking  into  account  a  special  discount  of  $50  for  payment  within  10  days. 
Through  oversight  the  voucher  was  not  paid  till  July  I,  thus  losing  the  discount.) 

Voucher  Register:  Bought  Desks  and  Tables  $200,431.95,  Bookcases  and 
Filing  Cabinets  $149,878.79,  Raw  Materials  $62,749.63.  Purchases  discount  was 
$4,290.89;  In-freight  and  Delivery  $8,650.  Payroll;  Direct  Labor  $99,475.50, 
Indirect  Labor  $11,900.17;  Engineers  and  Firemen's  wages  $5,125.67;  Building 
Maintenance  and  Repairs  $200;  Machinery  Repairs  $193.50;  Receiving  and 
Shipping  clerks,  $1,550.20;  Assembling  and  Setting-up  labor  $500.80;  Salesmen's 
Salaries  $173,790.25;  Travelling  Expense  $91,475.89;  Salesmen's  Commissions 
$79,612.40;  Delivery  men  $3,500;  office  salaries  $15,900;  Patterns  $1,250;  Fac- 
tory work  benches  $75;  Experimental  laboratory  $2,500.  Materials  purchased 
for  Building  maintenance  and  repairs  $326.40,  for  Machinery  repairs  $85,  for 
Patterns  $550.  Coal  and  water  cost  $11,193.40;  Sundry  light,  heat  and  power 
expense  $1,062.60;  Packing  and  shipping  supplies  $4,469.70;  Delivery  expense, 
including  motor-truck  repairs  and  maintenance,  $12,989.14;  Taxes  $585.43; 
Factory  supplies  $1,124.17;  Sundry  factory  expense  $750.28;  Royalties  $875; 
Insurance,  including  employers'  liability  insurance  for  factory  workmen,  $2,277.45; 
Warehouse  expense  $540;  Warehouse  rent  $850;  Sundry  selling  expense  $2,- 
196.40,  Rent  $7,500;  Stationery  and  printing  $2,310.17;  Telephone,  telegram 
and  postage  $1,092.15;  Sundry  office  expense  $1,312.43;  Collection  expense 
$1,025.43;  Interest  and  discount  $902.20;  Bond  interest  $450;  Materials  for 
laboratory  $1,500;  Legal  expense  in  defending  patents  $175;  Street  and  sewer 
improvement  tax  on  factory  sight  $525.60;  Advertising  $123,470.10;  Notes 
Payable  125,261.75:  Notes  Receivable  discounted  but  protested  and  charged 
back  $1,260.50,  Advances  to  salesmen  $1,500. 

SALES  JOURNAL.  Sales  to  Sundry  Customers:  Desks  and  Tables  $290,721.15; 
Bookcases  and  Filing  Cabinets  $204,422.20;  Knoxfrauds  $351,622.50.  Cash 
Sales  were:  Desks  and  Tables  $91,213.10;  Bookcases  and  Filing  Cabinets  $71,- 
253.20;  Knoxfrauds  $124,121.25.  Sales  returns  and  allowances  were:  Desks 
and  Tables  $10,192.50;  Bookcases  and  Filing  Cabinets  $8,269.10;  Knoxfrauds 
$21,569.65. 


CASH  BOOK.  Received:  from  Cash  Sales  as  above;  from  Sundry  Customers 
$624,736.74  less  Sales  Discount  of  $15,962.14;  from  interest  $750;  from  Notes 
Receivable  discounted  $19,260.25;  from  Notes  Receivable  $10,192.60;  from  Rent 
income  $160 — the  sub-lease  on  the  warehouse  was  cancelled  because  the  room 
was  needed  for  increased  stock — from  first  call  on  outstanding  subscriptions  to 
capital  stock  $18,250,  from  second  call  $18,000. 

Disbursed:  for  vouchers  payable  $1,005,833.95. 

JOURNAL.  Received  notes  from  Sundry  Customers  $59,370.50.  Gave  notes  to 
Sundry  Creditors  $45,000.  Notes  receivable  discounted  were  paid  by  makers  at 
maturity  $12,379.60.  Call  No.  I  on  unpaid  subscriptions  to  capital  stock  for 
one-half  the  outstanding  was  made  on  February  25  and  call  No.  2  on  June  25. 
Trade  debts  proved  uncollectible  from  bankruptcy  or  other  cause  to  the  amount 
of  $3,572.40. 


XXIV 

PROBLEM 

A  trial  balance  taken  from  the  general  ledger  of  the  Metal  Bed  Mfg.  Co.  for 
December  31,  1914  showed  as  follows: 

Bed  Sales  $325,198.67 

Bed  Sales  Returns  and  Allowances  $10,240.80 

Bed  Accessories  Sales  192,460.90 

Bed  Accessories  Sales  Returns  and  Allowances  8,175.25 

Raw  Material  Inventory  25,240. 16 

In-Freight  and  Drayage  1,460.24 

Beds  in  Process  15,970.20 

Finished  Beds  42,490.70 

Accessories  Inventory  19,580.65 

Direct  Labor  35,9 1 8 . 60 

Indirect  Labor  10,372.40 

Light,  Heat  and  Power  8,917.18 

Manufacturing  Expense  5,890.10 

Rent  3,300.00 

Machinery  Repairs  and  Renewals  575 .  oo 

Raw  Materials  Purchases  175,460.18 

Raw  Materials  Purchases  Returns  &  Allowances  9,840.60 

Accessories  Purchases  95,640.81 

Accessories  Purchases  Returns  and  Allowances  4,890.06 

Advertising  4,800.00 

Salesmen's  Salaries  13,690.75 

Salesmen's  Commissions  4,610.15 

Travelling  Expense  I  o,  1 1 1 . 25 

Out-Freight  and  Shipping  790.20 

Delivery  Expense  3,8 16 . 25 

Insurance  on  Sales  Room  Stock  475.00 

Insurance  on  Factory  Materials  820.00 

Insurance  on  Buildings  and  Equipment  1,890.00 

Miscellaneous  Selling  Expense  4»I75-3O 

Office  Salaries  1 5 ,2 1  o .  40 

Interest  and  Discount  3,620.55 

Bank  Expense  I 25 . 45 

Office  Furniture  and  Fixtures  1,240.00 

Depreciation  Reserve  Office  F.  and  F.  620.00 

Office  Supplies  720.20 

Miscellaneous  Office  Expense  1,810.65 

Leasehold  (99  years)  99,000.00 

Extinction  Reserve  for  Leasehold  24,000 .  oo 

Buildings  125,000.00 

Depreciation  Reserve  for  Buildings  50000.00 

Machinery  72,520.70 


21,490.16 


Depreciation  Reserve  for  Machinery 

Tools 

Patterns 

Depreciation  Reserve  for  Patterns 

Factory  Furniture  and  Fixtures 

Depreciation  Reserve  Factory  F.  and  F. 

Sales  Room  Furniture  and  Fixtures 

Depreciation  Reserve  Sales  Room  F.  and  F. 

Sales  Discount 

Purchases  Discount 

Good  Will 

Accounts  Receivable 

Notes  Receivable 

Accounts  Payable 

Notes  Payable 

Mortgage  Payable 

Petty  Cash 

Surplus 

Reserve  for  Doubtful  Accounts 

Capital  Stock  Common 

Capital  Stock  Preferred  6% 

Harriman  National  Bank 

Common  Dividend  No.  37 

Preferred  Dividend  No.  25 


$  1 ,042 ,966 .04    $  1 ,042 ,966 . 04 

The  company  conducts  a  factory  for  the  manufacture  of  metal  beds.  It  deals 
also  in  mattresses,  springs,  bed  furnishings,  etc.,  which  it  buys  ready-made  and 
sells  to  the  retail  trade.  Its  two  classes  of  sales,  beds  and  accessories,  are  kept 
distinct. 

Draw  up  a  balance  sheet  and  income  statement  for  the  year  showing  cost  to 
manufacture,  taking  into  account  the  following  inventories  and  other  adjustments: 


7,500.00 

8,ioo.oo 

5,405-i4 

3,190.20 

10,250.00 

8,440.05 

4,330.io 

10,375.90 

50,000.00 

110,472.05 
5,640.10 

62,490.35 

10,000.00 

15,000.00 

150.00 

150,154.24 

3,519.72 

100,000.00 

50,000  .  oo 

10,114.55 

2,000.00 

1,500.00 

Inventories: 


Accrued  Expenses: 


Prepaid  Expenses: 


Raw  Materials 

Beds  in  Process 

Finished  Beds 

Bed  Accessories 

Direct  Labor 

Indirect  Labor 

Rent 

Light,  Heat  and  Power 

Advertising 

Sales  Commissions 

Interest 

Coal,  waste,  oil,  etc. 

Advertising 

Office  Supplies 


$31,216.15 

18,793.80 

31,470.95 

24,640.10 

690.20 

325.00 

300.00 

180.20 

590.00 

319.40 

150.00 

125.00 

300.00 

75.00 


Bank  Discount  125.00 

Insurance  on  Sales  Room  Stock  50 .  oo 

Insurance  on  Factory  Materials  125.00 

Insurance  on  Buildings  and  Equipment  256 . 40 

Interest  earned  on  notes  receivable  but  not  yet  due  75 . 20 

Depreciation  is  estimated  as  follows  on  a  yearly  basis: 

Office  Furniture  and  Fixtures  81-3% 

Factory  Furniture  and  Fixtures  10% 

Sales  Room  Furniture  and  Fixtures  10% 

Buildings  2% 

Machinery  10% 

Patterns  20% 

The  Leasehold  was  originally  for  99  years  of  which  25  years  have  now  expired. 
Bad  Debts  are  calculated  as  2%  of  the  accounts  and  notes  outstanding. 
Tools  now  on  hand  amount  to  $4,800.25. 

In-freight  and  drayage  is  to  be  charged  55%  to  factory  and  45%  to  selling. 
Light,  Heat  and  Power  charge  90%  to  factory,  9%  to  selling,  and  i%  to  office. 
Rent,  charge  60%  to  factory,  35%  to  selling,  and  5%  to  office. 
Insurance  on  buildings  and  equipment,  distribute  according  to  the  values 
invested,  separating  buildings'  values  on  the  same  basis  as  rent. 

Dividends  No.  26  for  3%  on  preferred  and  No.  38  for  6%  on  the  common  are 
declared  and  paid. 


XXV 
PRACTICE  DATA 

Post  the  books  and  prepare  a  trial  balance  before  closing  the  ledger,  as  of 
December  31,  1911. 


XXVI 
PRACTICE  DATA  FOR  XXVI  AND  XXVII 

Close  the  books,  through  the  journal,  for  the  sixteen  months  ending  December 
31,  1911,  taking  account  of  the  following  adjustments  and  inventories: 

Coal  and  power  supplies  on  hand  $1,240. 19 

Packing  materials  on  hand  340 . 20 

Gasoline  on  hand  1 25 .  oo 

Factory  Supplies  I  oo .  oo 

Insurance  unexpired  540 . 23 

Warehouse  rent  prepaid  150.00 

Stationery  on  hand  1 50 .  oo 

Experimental  laboratory  materials  on  hand  425 .  oo 

Advertising  prepaid  500 .  oo 

Advertising  unpaid  1 ,000 .  oo 

Purchases  discount  not  yet  taken  on  unpaid  vouchers  840.22 

Direct  labor  accrued  1 ,793 . 75 

Indirect  labor  accrued  225 . 33 

Engineers  and  firemen's  wages  accrued  125.67 

Receiving  and  shipping  clerks'  wages  accrued  75 . 50 

Assembling  and  setting  up  wages  accrued  15.00 

Salesmen's  salaries  accrued  2,524.50 

Salesmen's  commissions  accrued  i  ,360 . 1 8 

Deliverymen's  wages  accrued  67 . 50 

Royalties  accrued  1 50 .  oo 

Rent  accrued  400 .  oo 

I  nterest  payable  17.25 

Taxes  on  factory  accrued  819 . 37 

Taxes  on  stock  accrued  395 . 62 

Bond  interest  accrued  1 50 .  oo 

Inventories  of  stock-in-trade  and  raw  materials  were: 

Desks  and  Tables  20,855  •  Jo 

Bookcases  and  Filing  Cabinets  17,671 .40 

Knoxfrauds,  finished  2,511.20 

Raw  Materials  15,241.92 

Goods  in  Process  9,255 . 65 

Calculate  depreciation  at  the  yearly  rates  given  below.  Except  in  the  case  of 
motor  trucks  where  the  date  of  the  last  purchase  is  to  be  taken  into  account, 
the  balance  in  the  account  is  to  be  used  as  the  basis,  reckoning  for  16  months. 

Power  Equipment  12  1-2% 

Machinery  81-3% 

Factory  Buildings  11-2% 

Patterns  20% 

Patents  1-14 

Delivery  Equipment  15% 


.Furniture  and  Fixtures,  Factory  12  1-2% 

Furniture  and  Fixtures,  Store  and  Office        10% 

Organization  Expense  5%  of  the  original  cost 

Tools  inventory  $825 . 50 

Allocate  the  following  charges  as  indicated : 
Insurance:  $2,196.43  to  Factory  and  $519.24  to  Selling. 
Taxes:  1,012.24  to  Factory  and    411 .23  to  Selling. 

Receiving  and  Shipping:  ^  to  Shipping  and  y*  to  Receiving  of  which, 

40%  to  Desks  and  Tables. 
35%  to  Bookcases  and  Filing  Cabinets. 
25%  to  Raw  Materials. 
In-freight  and  Delivery:  $4,400  to  Desks  and  Tables. 

3,500  to  Bookcases  and  Filing  Cabinets. 

750  to  Raw  Materials 
Rent:  $6,400  to  Selling,  $1,500  to  Office. 
Light,  Heat,  and  Power:  92%  to  Factory;  6%  to  Selling;  2%  to  Office. 

Create  a  reserve  for  doubtful  accounts  of  3%  on  Trade  Debtors  balances  and 
2%  on  Notes  Receivable  still  unpaid.  (Do  not  reckon  on  a  16  mos.  basis).  It 
is  decided  to  take  into  account  as  an  additional  expense  chargeable  to  this  period 
1/4%  of  outstanding  Trade  Debtors  for  sales  discounts  that  will  probably  still 
be  taken  advantage  of. 

Close  Loss  on  Sale  of  Dynamo  against  Surplus. 

Close  Fire  Loss  into  Strike  Loss  and  charge  Strike  Loss  to  Surplus. 

In  closing,  Bond  Discount  is  to  be  amortized  on  a  straight  line  basis,  i.e.  1-40 
each  half  year. 

The  Experimental  Laboratory  has  succeeded  in  securing  a  patent  for  a  listing 
and  adding  device  for  use  with  the  knoxfraud,  of  much  simpler  operation  and 
cheaper  to  manufacture,  than  the  one  on  which  royalty  is  being  paid.  Hence, 
when  the  royalty  contract  expires  it  will  not  be  renewed.  Capitalize  the  Labora- 
tory expense  to  date. 

A  very  careful  analysis  of  the  Advertising  costs  shows  an  expenditure  of  $78,- 
445.25  above  normal.  It  is  decided  to  transfer  this  to  Good  Will. 

Claims  for  damage  have  been  filed  against  the  railways  amounting  to  $1,025.10. 
(Bring  this  onto  your  books  with  an  offsetting  reserve  of  the  same  amount.) 

A  dividend  of  12^%  °n  the  common  is  declared  payable  January  20,  1912. 

Take  into  consideration  the  sinking  fund  requirements  of  the  bond  mortgage. 


XXVII 

PRACTICE  DATA 
Finish  the  work  given  under  XXVI. 


XXVIII 
PROBLEM 

A  fire  partially  destroyed  the  power  plant  and  equipment  of  the  Zehner  Manu- 
facturing Company  on  the  night  of  June  30,  1910,  entailing  a  loss  of  $25,000 
on  the  building  and  a  2-3  loss  on  the  equipment.  Insurance  for  one  year,  with 
the  80%  coinsurance  clause,  had  been  purchased  January  I,  1910  for  $1,775 
covering  the  above  property.  The  policies  carried  $40,000  on  the  power  house 
and  $100,000  on  the  power  house  equipment.  On  that  date — January  i,  1910 — 
the  values  of  the  power  house  and  equipment  as  shown  on  the  balance  sheet  were: 

Power  House  $75,000.00 

Less  Depreciation  Reserve  12,000.00 

$63,000.00 

Power  House  Equipment  200,000.00 

Less  Depreciation  Reserve  80,000.00 

1 20,000 .  oo 

Depreciation  was  estimated  at  the  rate  of  4%  per  annum  on  the  power  house 
and  10%  on  the  equipment. 

The  insurance  company  settled  on  the  above  basis. 
Make  all  the  necessary  adjustments  in  the  accounts. 


XXIX 
PRACTICE  DATA 

Prepare  a  Balance  Sheet  and  Income  Statement  as  of  December  31,  1911. 
Show  the  Cost  of  Sales  in  a  supplementary  schedule.  Prepare  also  a  statement 
of  Surplus  adjustments  since  the  last  regular  closing  and  a  condensed  Income 
Statement. 


XXX 

PRACTICE   DATA 

All  work  must  be  completed  and  ready  to  turn  in  by  the  close  of  the  session. 
No  credit  is  given  for  work  presented  after  this  date. 


PART  II 


PROBLEM  I 

At  the  close  of  the  fiscal  year  ended  June  30,  1900,  Thomas  J.  Howe  called  you 
in  to  determine  his  financial  condition.  From  the  books,  which  were  kept  on  the 
single-entry  plan,  and  from  other  sources  you  gathered  the  following  informa- 
tion: 

The  ledger  contained  the  following  accounts:  Thomas  J.  Howe,  c-a  $4,000; 
Thomas  J.  Howe,  d-a  (debit)  $472;  Expense  (debit)  $184;  Sales  $18,945;  Pur- 
chases $17,450;  customers'  accounts  considered  good:  H.  E.  Brewer  $110;  D. 
Cohen  $85;  Will  Benton,  $190;  Linn  Bros.,  $77;  Customers'  accounts  which 
have  proved  uncollectible:  Peter  Metz,  $43;  L.  C.  Fish,  $101;  Creditors'  ac- 
counts: Stone  Bros.,  $942;  Little  &  Co.,  $1,082;  H.  Hudson,  $1,220;  also  ac- 
counts with  Salaries,  $375;  Advertising,  $112. 

Other  sources  yielded  this  information:  Stock  of  goods  on  hand  inventoried 
at  $5,641;  Horses  and  wagons  estimated  as  worth  $730;  Store  Fixtures,  $1,114; 
Rent  of  store  building  unpaid,  $300;  Clerks'  salaries  unpaid,  $84;  Notes  Re- 
ceivable, $2,300;  Notes  Payable  outstanding  (non-interest  bearing)  $2,400. 
Bill  of  goods  received  from  Stone  Bros.,  which  has  been  included  in  the  in- 
ventory but  which  has  not  been  entered  in  Stone  Bros.'  account,  $193;  Interest 
accrued  on  Notes  Receivable,  $16;  Cash  in  the  bank  and  safe,  $1,724. 

It  was  found  that  the  following  information  was  available  for  determining 
his  financial  condition  as  at  the  close  of  the  preceding  fiscal  year,  June  30,  1899: 
Cash,  $1,478;  Notes  Receivable,  $500;  Notes  Payable,  $800;  Howe's  Capital 
a-c,  $4,000;  Store  Fixtures,  $900;  Inventory  of  goods  in  stock,  $2,800;  Horses 
and  Wagons  at  an  estimated  value  of  $800;  Customers'  accounts  total,  $2,314; 
Creditors'  accounts  total,  $3,609. 

From  the  foregoing,  prepare 

1.  Statement  of  financial  condition  of  Thomas  J.  Howe  as  of  June  30,  1900. 

2.  Statement  showing  the  amount  of  profit  made  or  loss  sustained  for  the 
fiscal  year  ended  June  30,  1900. 


PROBLEM  II 

1.  Prepare  a  statement  setting  forth  in  numerical  order  the  advantages  of 
double-entry  over  single-entry  accounting  systems. 

2.  As  a  result  of  your  convincing  argument  Mr.  Howe  has  decided  to  change 
his  system  of  accounting  from  single  to  double-entry. 

From  data  obtained  from  the  solution  of  Problem  No.  I,  prepare  the  neces- 
sary entries  to  change  the  accounting  system  to  double-entry,  continuing  the  use 
of  the  old  ledger  and  providing  for  controlling  accounts  for  customers  and 
creditors. 

3.  Show  by  means  of  a  skeleton  ledger  the  present  condition  of  all  the  accounts 
after  converting  the  single-entry  ledger  into  a  double-entry  ledger. 

4.  Prove  that  you  have  the  ledger  in  double-entry  form  by  presenting  a  trial 
balance. 


PROBLEM  III 

The  following  trial  balance  was  taken  from  the  books  of  Thomas  J.  Howe  at 
the  close  of  the  next  fiscal  year. 

THOMAS  J.  HOWE,  TRIAL  BALANCE,  JUNE  30,  1901. 

Cash  $894 . oo 

Notes  Receivable  5,000.00 

Accounts  Receivable  18,000.00 

Thomas  J.  Howe,  c-a  6,000.00 

Thomas  J.  Howe,  d-a  560 .  oo 

Notes  Payable  3,ooo .  oo 

Accounts  Payable  15,640.00 

Purchases  77,100.00 

Sales  93,620.00 

Mdse.  Inventory,  6-30-1900  5,641.00 

Purchase  Discounts  743 .  oo 

Sales  Discounts  1,420.00 

Freight  Inward  2,884.00 

Insurance  300.00 

Interest  Earned  146.00 

Returned  Sales  930 .  oo 

Returned  Purchases  760.00 

Furniture  and  Fixtures  2,000.00 

Horses,  Wagons  and  Harness  1,200.00 

Rent  1,500.00 

Advertising  300 .  oo 

Expense  180.00 

Salaries  1,600.00 

Commissions  Paid  on  Sales  400 .  oo 


$119,909.00   $119,909.00 

At  this  date,  you  will  find  that  the  following  items  must  be  considered  to  de- 
termine the  financial  condition  of  Mr.  Howe: 
Mdse.  Inventory,  6-30-01,  $2,470. 
Insurance  Unexpired,  $100. 
Interest  accrued  on  notes  receivable,  $66. 
Interest  accrued  on  notes  payable,  $30. 
He  owes  for  two  months'  rent,  $300. 

i%  of  net  sales  is  to  be  set  aside  as  a  reserve  for  uncollectible  accounts. 
Furniture  and  Fixtures  are  to  be  written  off  in  the  amount  of  10%. 
Provide  for  a  reserve  of  10%  for  depreciation  of  Horses,  Wagons  and  Harness. 
Advertising  carried  forward  to  the  next  period,  $75. 
Unused  stationery  and  other  expense  items,  $42. 
Commissions  on  sales  due  but  unpaid,  $90. 

1.  Prepare  the  working  sheet. 

2.  Construct  the  Balance  Sheet  as  of  June  30,  1901. 

3.  Prepare  Profit  and  Loss  Statement,  showing  percentages  based  on  net  sales. 

4.  Write  the  adjusting  and  closing  journal  entries. 


PROBLEM  IV 

Joseph  Mason  was  Howe's  greatest  competitor.  After  getting  better  ac- 
quainted with  each  other,  Howe  conceived  the  plan  of  uniting  their  capital 
and  services  in  the  form  of  a  partnership.  After  some  discussion  it  was  decided 
to  operate  as  Howe  &  Mason,  the  capital  to  consist  of  $12,000  of  which  Howe  is 
to  contribute  $8,000  in  the  form  of  his  existing  business.  The  excess  of  Howe's 
net  worth,  as  shown  by  the  Balance  Sheet  of  June  30,  1901,  over  $8,000,  his 
investment  in  the  partnership,  is  to  be  considered  as  a  loan  to  the  firm.  Mason 
is  to  transfer  his  entire  business — assets  and  liabilities — and  sufficient  cash  to 
make  his  net  investment  $4,000,  or  one-third  of  the  total  capitalization. 

As  of  July  i,  1901,  the  date  of  the  formation  of  the  partnership,  Mason's  assets 
and  liabilities  were  as  follows:  Cash,  $1,340;  accounts  receivable,  $2,460;  notes 
receivable,  $1,120;  stock  of  goods  inventoried  at  $4,590;  furniture  and  fixtures 
appraised  at  $1,316;  accounts  payable,  $5,280;  notes  payable,  $1,770;  rent  unpaid 
$320. 

1.  Prepare  journal  entries  to  give  effect  to  the  foregoing  on  Howe's  books, 
which  are  to  be  continued  for  the  partnership. 

2.  During  the  year  Charles  Palmer  purchased  one-third  interest  in  the  capital 
and  profits  of  the  firm  by  contributing  $9,000  in  cash.    The  total  capital  of  the 
new  firm  is  set  at  $18,000.    Business  is  to  be  conducted  under  the  old  firm  name, 
the  old  partners  retaining  their  respective  capital  investments.     Howe's  loan 
account  is  to  be  continued  at  its  original  amount. 

Write  the  necessary  journal  entries  to  record  on  the  books  of  the  firm  the 
admission  of  the  new  partner  and  the  adjustments  between  Howe  and  Mason. 

3.  Before  determining  the  profits  for  the  year  Palmer  assigns  his  interest 
in  the  capital  and  profits  of  the  firm  to  John  H.  Bartlett,  who  settles  directly 
with  Palmer  for  $10,000.    Howe  and  Mason  agree  to  admit  Bartlett  as  a  partner 
in  place  of  Palmer  and  new  articles  of  partnership  are  signed  by  the  members. 

Give  journal  entries  to  show  the  effect  on  the  partnership  books. 


PROBLEM  V 


The  business  has  been  in  operation  as  a  partnership  one  year.  At  the  con  elusion 
of  this  period  the  trial  balance  given  below  shows  the  condition  of  the  accounts 
on  the  books  of  the  firm. 

HOWE  AND  MASON,  TRIAL  BALANCE,  JUNE  30,  1902. 


Cash 

Accounts  Receivable 

Reserve  for  Bad  Debts 

Horses,  Wagons  and  Harness 

Reserve  for  Depreciation,  H.  W.  &  H. 

Furniture  and  Fixtures 

Mdse.  Inventory,  6-30-01 

Notes  Receivable 

Notes  Receivable  Discounted 

Accounts  Payable 

Notes  Payable 

Thomas  H.  Howe,  Loan  a-c 

Thomas  J.  Howe,  c-a 

Thomas  J.  Howe,  d-a 

Joseph  Mason,  c-a 

Joseph  Mason,  d-a 

John  H.  Bartlett,  c-a 

Sales 

Returned  Sales  and  Allowances 

Purchases 

Freight  Inward 

Warehouse  Labor  and  Supplies 

Returned  Purchases  and  Allowances 

Salesmen's  Salaries 

Advertising 

Freight  and  Cartage  Outward 

Office  Salaries 

Postage 

Stationery  and  Printing 

Legal  Expenses 

Office  Heat  and  Light 

Interest  Earned 

Interest  on  Bank  Balances 

Cash  Discount  on  Sales 

Cash  Discount  on  Purchases 

Interest  Paid 

Telephone  and  Telegrams 

Insurance 

Rent 


$1,872.00 
22,945.00 

3,100.00 

5,390.00 

7,060.00 

12,456.00 


384.00 

I2O.OO 


4,78O.OO 

24,22O.OO 

8,500.00 

1,540.10 

8,000 .  oo 


2,440.00 

4,000  .  oo 

1,710.00 

6,000  .  oo 

158,335.00 

3,890.00 

144,244.60 

3,518.50 

1,002.00 

2,714.00 


2,215.00 

872 . oo 

316.00 

2,619.00 

82.00 

116.00 

85.00 

212. OO 


2,306.00 

143-00 

17.00 

500.00 

2,200.00 


1 1 7 . 00 
I4.OO 

3,041.00 


Miscellaneous  Expense  74  oo 

Commissions  on  Sales  380.00 


$221,765.10   $221,765.10 

Additional  information: 

Mdse.  Inventory  6-30-02,  $13,260. 

Stationery  and  printed  matter  on  hand,  $35. 

Unused  postage  stamps,  $17. 

One-fourth  of  advertising  is  to  be  applied  to  the  next  year. 

Warehouse  labor  of  $130,  due  but  unpaid,  has  not  been  recorded  on  the  books. 

Interest  accrued  but  not  recorded:  On  notes  receivable,  $71 ;  on  notes  payable, 
$47;  on  bank  balances,  $8. 

Rent  prepaid,  $200. 

You  find  that  no  record  has  been  made  on  the  books  for  $750  worth  of  mer- 
chandise received  from  Marsh  &  Co.,  but  that  these  goods  have  been  included 
in  the  inventory  of  6-30-02. 

Four-fifths  of  the  insurance  has  expired. 

Interest  is  to  be  accrued  on  Howe's  Loan  account  at  6%. 

Through  error  $100  of  commissions  on  sales  has  been  charged  to  Salesmen's 
Salaries  account. 

It  has  been  decided  to  provide  for  depreciation  and  reserves  as  follows: 

10%  reserve  on  reducing  balances  for  Horses,  Wagons  and  Harness. 

A  reserve  of  %%  on  sales  for  uncollectible  accounts. 

By  writing  off  10%  of  the  book  value  of  Furniture  and  Fixtures. 

Profits  and  losses  are  to  be  shared  according  to  the  original  investments  of  the 
partners. 

Give  due  consideration^  to  the  foregoing  and  construct 

1.  The  Working  Sheet  as  of  June  30,  1902. 

2.  Balance  Sheet. 

3.  Profit  and  Loss  Statement  containing  percentages  on  sales. 

4.  Adjusting  and  closing  journal  entries. 


PROBLEM  VI 

July  I,  1902,  the  capital  of  the  firm  of  Howe  &  Mason  is  increased  to  $30,000 
and  Wm.  R.  Gray  is  admitted  as  a  partner. 

Among  other  things,  the  articles  of  copartnership  provide  that : 

Business  is  to  be  conducted  under  the  firm  name  of  Howe,  Mason  &  Co. 

The  representation  of  the  partners  in  the  capital  of  the  firm  shall  be  Howe, 
8-20;  Mason,  5-20;  Bartlett,  3-20;  Gray,  4-20. 

Profits  and  losses  shall  be  shared  according  to  the  capital  representation 
of  the  partners  as  at  the  time  of  formation  of  this  partnership.  In  the  event  of 
the  death  of  a  partner  an  accounting  shall  be  made  at  the  close  of  the  fiscal 
year  in  which  the  death  occurs  and  the  value  of  the  deceased  partner's  estate 
determined  as  of  the  date  of  his  death  by  prorating  profits  on  a  monthly  basis. 

Gray  is  to  pay  for  one-fifth  (1-5)  interest  in  the  capital  of  the  firm  by  giving 
the  firm  his  note  for  $2,000  and  $4,000  in  cash.  The  difference  in  capital  is  to  be 
supplied  by  goodwill,  which  is  to  be  distributed  among  the  three  partners  con- 
stituting the  firm  of  Howe  &  Mason  on  the  basis  of  their  original  capital  contribu- 
tions to  that  firm. 

After  adjustments  have  been  made  the  respective  partners'  drawing  accounts 
shall  be  settled  in  cash. 

1.  Write  the  necessary  journal  entries  to  admit  Gray  as  a  partner  and  to  adjust 
the  several  partners'  capital  and  drawing  accounts . 

2.  Set  up  the  capital  and  drawing  accounts  of  all  the  partners. 


PROBLEM  VII 

Wm.  R.  Gray  died  November  30,  1904,  two  years  and  five  months  after  he 
became  a  partner  in  the  firm  of  Howe,  Mason  &  Co.  As  provided  in  the  articles 
of  partnership,  the  business  continued  until  the  end  of  the  fiscal  year,  June  30, 
1905,  at  which  date  an  accounting  was  made  on  the  basis  of  the  following  trial 
balance  and  subjoined  data. 

HOWE,  MASON  &  Co.,  TRIAL  BALANCE,  JUNE  30,  1905. 
Land  $10,000.00 

Buildings  40,000 .  oo 

Reserve  for  Depreciation — Buildings  2,000 .  oo 

Delivery  Equipment  6,000.00 

Reserve  for  Depreciation — Equipment  1,200.00 

Furniture  and  Fixtures  5,99O.oo 

Goodwill  6,000.00 

Cash  2,010.00 

Accounts  Receivable  26,000.00 

Reserve  for  Bad  Debts  1,460.00 

Notes  Receivable  7,500.00 

Notes  Receivable  Discounted  4,500.00 

Mdse.  Inventory — Bags,  6-30-04  6,770.00 

Mdse.  Inventory — Trunks,  6-30-04  12,410.00 

Mortgage  Payable  25,000.00 

Accounts  Payable  26,000.00 

Notes  Payable  14,400.00 

Thomas  J.  Howe,  Loan  a-c  2,000.00 

Thomas  J.  Howe,  c-a  12,000.00 

Thomas  J.  Howe,  d-a  1,210.00 

Joseph  Mason,  c-a  7,500.00 

John  H.  Bartlett,  c-a  4,500.00 

Wm.  R.  Gray,  c-a  6,000 .  oo 

Wm.  R.  Gray,  d-a  1,100.00 

Sales — Bags  7 1 ,432 .  oo 

Returned  Sales  and  Allowances — Bags  3,690.00 

Sales— Trunks  212,386.00 

Returned  Sales  and  Allowances — Trunks  1,508.00 

Purchases — Bags  59,3 1 5 .  oo 

Returned  Purchases  and  Allowances — Bags  4i23O .  oo 

Purchases — Trunks  184,824 .  oo 

Returned  Purchases  and  Allowances — Trunks  2,716.00 

Freight  Inward  7,020.00 

Warehouse  Labor  and  Supplies  i  ,875 .  oo 

Salesmen's  Salaries  4>3°3  •  °° 

Salesmen's  Traveling  Expenses  2,809.00 

Advertising  2, 146 .  oo 

Freight  and  Cartage  Outward  1,154.00 


Commissions  on  Sales  981 .00 

Office  Salaries  2,274.00 

Miscellaneous  Office  Supplies  170.00 

Legal  Expense  200 .  oo 

Postage  127.00 

Telephones  and  Telegrams  93 .  oo 

Interest  Earned  on  Notes  Receivable  385.00 

Cash  Discounts  on  Purchases  3»547-OO 

Rent  Collected  1,500.00 

Taxes  1,312.00 

Insurance  680.00 

Interest  Paid  472.00 

Cash  Discounts  on  Sales  2,789.00 

Collection  and  Exchange  24 .  oo 


$402,756.00   $402,756.00 

The  books  have  been  closed  at  the  end  of  each  fiscal  year. 

Mdse.  Inventories,  June  30,  1905,  Bags,  $2,431;  Trunks,  $4,380. 

A  reserve  of  %%  of  the  sales  is  to  be  provided  for  bad  debts. 

The  furniture  and  fixtures  are  to  be  written  down  10%  of  their  book  value. 

The  old  account  of  Horses,  Wagons  and  Harness  was  closed  and  Delivery 
Equipment  opened  when  the  horses  were  sold  and  an  automobile  service  installed. 
It  is  deemed  advisable  to  increase  the  reserve  by  10%  of  the  declining  value. 

An  additional  5%  of  the  original  cost  of  the  buildings  will  be  set  aside  as  a 
reserve  for  depreciation. 

Accruals  as  follows:  Taxes, $3 70;  Interest  on  mortgage  9  months  at  5%;  Interest 
on  notes  receivable,  $80;  Interest  on  notes  payable,  $520;  Interest  on  bank 
balances,  $61.20;  Office  salaries,  $150;  Interest  on  Loan  a-c  6%  for  one  year. 

Advances  made  to  salesmen  on  salaries,  $400;  Tenants  paid  $300  in  advance 
rent;  Unused  postage,  $32;  Miscellaneous  office  supplies  on  hand,  $30;  One-fourth 
of  the  insurance  remains  in  force;  Advertising  applicable  to  the  next  period,  $600. 

Profits  and  losses  are  to  be  shared  according  to  the  original  investments,  as 
stated  in  the  articles  of  partnership. 

In  the  event  of  dissolution,  goodwill  is  to  be  increased  at  the  rate  of  24%  per 
year. 

As  of  June  30,  1905 

1.  Prepare  Working  Sheet. 

2.  Construct  Balance  Sheet. 

3.  Construct  Income  Statement. 

4.  Write  entries  which  will  adjust  the  partnership  interest  represented  by 
Gray's  estate. 

5.  Write  the  closing  journal  entries. 

6.  The  three  remaining  partners  take  over  the  interest  of  Gray's  estate, 
paying  therefor  cash  $1,000  and  three  equal  notes  with  interest  at  6%,  maturing  in 
one,  two  and  three  years,  for  the  balance. 


PROBLEM  VIII 


Three  years  later,  June  30,  1908,  as  a  result  of  careless  management,  the  firm 
of  Howe,  Mason  &  Co.  finds  itself  in  a  critical  financial  condition. 

The  following  trial  balance  shows  the  accounts  as  they  appear  on  the  books 
after  closing  the  ledger. 

POST  CLOSING  TRIAL  BALANCE,  JUNE  30,  1908 


Land 

Buildings 

Reserve  for  Depreciation — Buildings 

Delivery  Equipment 

Reserve  for  Depreciation — Equipment 

Furniture  and  Fixtures 

Goodwill 

Cash 

F.  D.  Co.  Stock 

Accounts  Receivable 

Reserve  for  Bad  Debts 

Notes  Receivable 

Notes  Receivable  Discounted 

Mdse.  Inventory — Bags  6-30-08 

Mdse.  Inventory — Trunks  6-30-08 

Mortgage  Payable 

Accounts  Payable 

Notes  Payable 

Thomas  J.  Howe,  Loan  a-c 

Thomas  J.  Howe,  c-a 

Thomas  J.  Howe,  d-a 

Joseph  Mason,  Loan  a-c 

Joseph  Mason,  c-a 

Joseph  Mason,  d-a 

John  H.  Bartlett,  Loan  a-c 

John  H.  Bartlett,  c-a 

Accrued  Interest,  Mortgage 

Accrued  Interest,  Notes  Payable 

Accrued  Interest,  Notes  Receivable 

Prepaid  Insurance 

Taxes  Accrued 

Accrued  Labor 

Miscellaneous  office  supplies 


$10,000.00 
42,000.00 

7,000 .  oo 

4,200 .  oo 
5,000.00 
2,316.00 
4,000 .  oo 
16,000.00 

9,400 .  oo 

4,780.00 
8,910.00 


1,700.00 


1,000.00 


150.00 
60.00 


80.00 


6,000 .  oo 
1,500.00 


1,996.00 
3,800.00 


25,000.00 
21,000.00 
12,000.00 
6,000.00 
15,000.00 

4,000 .  oo 
9,000 .  oo 

3,000.00 

6,000 .  oo 

1,500.00 

300 . oo 


300 . oo 

2OO . OO 


$116,596.00  $116,596.00 

There  is  dissatisfaction  among  the  partners  and  they  finally  agree  to  dissolve 
partnership.  Preparatory  to  dissolving  they  appraise  the  assets  and  rank  the 
liabilities  on  a  liquidating  basis. 


It  has  been  found  that  the  buildings  had  been  damaged  by  fire  to  the  extent 
of  $3,000  but  that  no  adjustment  had  been  made  in  the  buildings  account.  The 
delivery  equipment  is  estimated  to  produce  $4,800. 

Furniture  and  fixtures  have  a  value  of  $3,600. 

The  land  has  increased  in  value  $6,000. 

Of  the  notes  payable  $5,000  has  been  partially  secured  by  all  the  F.  D.  Co. 
Stock,  which  is  expected  to  yield  80%  of  its  book  value. 

Collateral  in  the  form  of  good  notes  receivable  of  $4,500  has  been  given  to 
creditors  whose  claims  amount  to  $3,700. 

Among  the  cash  there  are  I.  O.  U.'s  in  the  amount  of  $180  that  cannot  be 
considered  as  worth  more  than  $50. 

The  accounts  receivable  are  classified  as  worthless  $3,000;  doubtful,  $2,000, 
which  are  expected  to  produce  $1,400;  the  balance  are  good. 

Both  inventories  of  merchandise  were  reduced  by  10%. 

The  accrued  taxes  and  labor  are  claims  preferred  by  law. 

Prepaid  insurance,  miscellaneous  office  supplies  and  goodwill  were  assumed 
to  have  no  value  in  case  of  liquidation. 

From  the  information  at  hand 

1.  Prepare  a  Statement  of  Affairs  showing  the  financial  condition  of  the 
partnership  in  anticipation  of  liquidation. 

2.  Prepare  a  statement  accounting  for  the  impairment  of  capital. 


PROBLEM  IX 

It  has  been  mutually  agreed  that  Joseph  Mason  shall  act  as  liquidating  partner 
with  full  authority  to  sell  all  property,  pay  all  debts  and  distribute  liquidating 
dividends  among  the  partners.  Mason's  fee  as  liquidator  shall  be  5%  commis- 
sion on  the  converted  value  of  all  the  assets  and  is  to  be  paid  at  each  dividend 
date. 

Interest  is  to  be  allowed  on  the  loan  accounts  and  profits  and  losses  are  to  be 
shared  %  by  Howe  and  %  each  by  Mason  and  Bartlett,  during  the  period  of 
liquidation. 

Settlements  are  to  be  made  on  the  last  day  of  each  month. 

Based  on  the  post-closing  trial  balance  in  Problem  VIII  and  the  information 
given  below: 

1.  Prepare  a  working  sheet  which  will  present  the  information  in  convenient 
form  for  preparing  the  statements  incidental  to  liquidation. 

2.  Show  the  partners'  loan  accounts  properly  closed  for  each  period. 

3.  Set  up  the  partners'  capital  accounts,  balancing  each  account  after  the 
payment  of  each  liquidating  dividend. 

During  the  month  ended  July  31,  1908,  Delivery  Equipment  having  a  book 
value  of  $3,300  was  sold  for  $3,000  in  cash;  accounts  receivable  in  the  amount 
of  $4,000  were  collected  and  $980  in  bad  debts  were  charged  off.  A  sale  of  the 
land  and  buildings  made  subject  to  the  mortgage,  granted  the  use  of  the  premises 
during  the  liquidation.  The  land  brought  $17,000  and  the  buildings  yielded 
$31,500.  The  partially  secured  creditors  accepted  the  F.  D.  Co.  Stock  held  as 
collateral  at  90%  of  its  book  value  and  the  balance  of  their  claim  was  paid  in 
cash.  Incidental  expenses  of  $350  and  the  liquidating  fees  were  paid  in  cash. 
From  the  goods  in  the  inventories  there  were  sold  Bags  of  a  book  value  of  $1,200 
for  $1,120  and  Trunks,  book  value  $2,530,  for  $2,280.  There  was  paid  to  holders 
of  unsecured  notes  payable  $2,000  and  interest  of  $100.  The  accrued  labor  was 
paid  and  $10,000  in  unsecured  accounts  payable  were  settled.  The  balance 
of  the  cash  was  applied  in  paying  off  partners '  loans  and  capital  as  a  liquidating 
dividend. 

The  next  month  the  delivery  equipment  was  sold  for  $1,850.  Furniture  and 
Fixtures  having  a  book  value  of  $2,100  was  sold  for  $1,700.  Of  the  I.  O.  U.'s 
$70  was  collected;  the  balance  proved  worthless.  The  notes  receivable  as  colla- 
teral in  the  hands  of  fully  secured  creditors  were  settled  in  full  and  our  equity 
was  paid  to  us  in  cash,  also  accrued  interest  of  $120.  Bags  having  a  book  value 
of  $2,500  were  sold  for  $2,100  and  Trunks  at  book  $3,700  brought  $3,200.  Mason 
accepted  $4,200  in  settlement  of  $5,000  in  accounts  receivable. 

Legal  fees  of  $150;  sundry  expenses  of  $460;  all  the  existing  debts  and  the 
liquidating  fees  were  paid  in  cash.  The  cash  remaining  was  distributed  as  a 
liquidating  dividend  in  such  amounts  as  to  make  the  profit  and  loss  and  capital 
ratios  on  the  same  basis. 

In  the  course  of  the  last  month  the  remaining  furniture  and  fixtures  were 
sold  for  $1,900.  The  goodwill  went  to  the  same  purchaser  for  $1,000  additional. 
The  prepaid  insurance  is  without  value.  Office  supplies  yielded  $20.  The  notes 


receivable,  together  with  the  balance  of  accrued  interest  were  collected  in  full. 
There  was  lost  in  bad  debts  $740.  The  Bags  were  sold  at  a  10%  reduction. 
The  partners  divided  the  Trunks  among  themselves  one-third  to  each,  taking 
them  at  book  value. 

Sundry  expenses  of  $340  and  the  liquidating  fees  were  paid  in  cash,  after  which 
the  cash  on  hand  was  distributed. 


PROBLEM  X 

Show  on  the  books  of  the  firm  of  Howe,  Mason  &  Co.  all  the  entries  necessary 
to  carry  into  effect  the  liquidation  of  the  business  under  the  conditions  set  forth 
in  Problem  IX. 


PROBLEM  XI 

The  Ironclad  Trunk  Corporation  was  organized  and  incorporated  November 
I,  1908  for  the  purpose  of  manufacturing  trunks,  bags  and  brushes  of  all  kinds 
and  dealing  in  traveling  requisites  of  every  description. 

The  authorized  capital  of  $100,000  consists  of  750  shares  of  common  stock 
having  a  par  value  of  $100  per  share  and  250  shares  of  preferred  stock  of  the  same 
par  value. 

The  incorporators  subscribed  to  and  paid  for  the  common  stock  as  indicated 
below. 

Thomas  J.  Howe,  250  shares  in  cash. 

Joseph  Mason,  150  shares  by  transferring  the  following  assets  and  liabilities: 
cash,  $3,000;  accounts  receivable,  $7,000;  notes  payable,  $3,000;  notes  re- 
ceivable, $2,000;  stock  of  raw  material,  $9,000;  accounts  payable,  $5,000;  furni- 
ture and  fixtures,  $2,000. 

Edward  Harrison,  100  shares  by  giving  bill  of  sale  of  machinery  appraised  at 
$6,000;  the  balance  to  be  paid  in  one  year. 

Charles  E.  Wells,  50  shares  by  his  personal  note  for  $5,000  with  interest  at 
6%,  due  in  one  year. 

In  connection  with  the  organization  of  the  corporation  the  following  items 
were  paid  in  cash:  corporation  tax,  $50;  filing  fees,  $20;  recording  fees,  $12; 
legal  expenses,  $500. 

1.  Write  journal  entries  to  record  this  information  on  the  books  of  the  corpora- 
tion. 

2.  Prepare  a  balance  sheet  showing  the  condition  of  the  corporation  at  this 
date. 


PROBLEM  XII 


The  following  trial  balance  was  taken  from  the  books  of  the  Ironclad  Trunk 
Corporation  at  the  close  of  its  first  year.  From  it  and  the  additional  notations 
appended  thereto  you  are  asked  to  furnish 

1.  Working  Sheet. 

2.  Balance  Sheet. 

3.  Income  Statement. 

4.  Closing  journal  entries. 


TRIAL  BALANCE, 
Fifth  National  Bank 
Imprest  Cash 
Land 
Buildings 

Machinery  and  Tools 
Materials  and  Supplies  11-1-08 
Accounts  Receivable 
Finished  Goods  11-1-08 
Notes  Receivable 
Notes  Receivable  Discounted 
Advertising  unexpired 
Insurance  prepaid 
Purchases — Material 
Notes  Payable 
Taxes  Accrued 
Wages  Accrued 
Returned  Sales 
Returned  Purchases 
Factory  Supplies 
Labor — Direct 
Superintendence 
Heat,  Light  and  Power 
Miscellaneous  Wages — Factory 
Factory  Expense 
Accounts  Payable 
Res.  for  Dep.  Buildings 
Int.  Accrued  on  Notes  Payable 
Sales 

Interest  on  Bank  Balances 
Freight  Inward 
Expense 
Taxes 

Rent  of  Building 
Res.  for  Dep.  of  Machinery 
Salesmen's  Salaries 
Repairs  to  Machinery 


OCTOBER  31,  1909. 

$7,940.00 

200.00 

10,000.00 

30,000 .  oo 

25,000.00 

9,000.00 

12,000.00 

1,000.00 

10,000.00 

1,000.00 

200.00 

110,000.00 


2,200.00 

2,600 .  oo 
70,000 .  oo 

4,000 .  oo 
12,000.00 

3,620.00 
400 . oo 


2,770.00 

1,920.00 

350.00 


4,200.00 
630.00 


4,000 .  oo 


18,000.00 

2OO . OO 

3,400.00 
2,800.00 


26,000 .  oo 

3,000 .  oo 

700.00 

214,706.00 

46.00 


1,000.00 

2,500.00 


Res.  for  Bad  Debts  1,000.00 

Cash  Discount  on  Purchases  3,110.00 

Interest  Earned  418.00 

Commissions — Salesmen  3,600.00 

Office  Salaries  2 , 800 .  oo 

Insurance  150.00 

Freight  Outward  1,100.00 

Provision  for  Bad  Debts  1,000.00 

Furniture  and  Fixtures  3,700.00 

Authorized  Capital  Stock — Preferred  25,000.00 

Authorized  Capital  Stock — Common  75,000.00 

Unissued  Stock — Preferred  12,000.00 

Unissued  Stock — Common  20,000.00 

Subscriptions  4,000 .  oo 

Notes  Rec. — Stock  Subscription  6,000 .  oo 

Bonding  Employees — Office  I  oo .  oo 

Cash  Discount  on  Sales  2,300.00 

Provision  for  Depreciation — Machinery  2,500.00 

Advertising  600 .  oo 


$380,880.00   $380,880.00 

* 

You  are  presented  with  properly  certified  statements  showing  the  present  in- 
ventory of  Materials  and  Supplies  to  be  $16,300;  Goods  in  Process,  $1,400;  Fin- 
ished Goods,  $9,800  and  Factory  Supplies  in  storeroom,  $700.  It  has  been  esti- 
mated that  $200  of  the  Freight  Inward  is  applicable  to  the  present  inventory. 
Salesmen  have  been  overpaid  $600  on  their  salary  accounts.  Items  aggregating 
$400  which  have  been  charged  to  Expense  are  found  to  be  on  hand.  In  the  Cus- 
tomers' Ledger  you  find  accounts  having  credit  balances  amounting  to  $1,500, 
and  uncollectable  accounts  to  the  amount  of  $710.  You  decide  to  write  down 
Furniture  and  Fixtures  10%. 


PROBLEM  XIII 

After  Edward  S.  White,  the  inventor  of  a  process  for  constructing  a  superior 
fiber  for  trunk  making,  demonstrated  the  practicability  of  his  process,  the  Iron- 
clad Trunk  Corporation  purchased  all  his  rights  in  patents  granted  by  United 
States,  Canada,  Mexico  and  Great  Britain.  The  sale  went  into  effect  January  i, 
1910.  The  consideration  of  $100,000  was  made  payable  $60,000  in  cash;  $20,000 
in  bonds  at  par  and  $20,000  in  two  year  interest-bearing  notes  of  the  company. 

To  provide  for  payment  of  the  patent,  the  corporation,  after  duly  complying 
with  all  legal  requirements,  issued  $100,000  in  15  year  5%  sinking  fund  bonds, 
under  date  of  December  i,  1909.  During  the  month  $70,000  in  bonds  were  sold 
for  cash  at  98. 

1.  Formulate  journal  entries  to  give  effect  to  the  foregoing  on  the  books  of 
the  corporation. 

2.  Prepare  a  statement  setting  forth  the  successive  yearly  instalments  to  pro- 
vide a  sinking  fund  on  a  4%  basis  which  will  be  sufficient  to  retire  the  bond  issue 
at  maturity. 

3.  Write  the  journal  entries  for 

a.  The  first  sinking  fund  instalment. 

b.  The  first  interest  accumulation. 

c.  The  liberation  of  the  sinking  fund  at  maturity. 

d.  The  retirement  of  the  bonds  at  maturity. 


PROBLEM  XIV 

Several  customers  protested  vigorously  against  paying  their  accounts  when 
we  sent  them  statements  requesting  payment.  They  denied  that  they  owed  the 
amounts  shown  on  our  books  and  produced  receipts  and  cancelled  checks  to 
prove  their  contentions.  In  many  cases  we  found  that  the  receipts  and  checks 
were  dated  several  weeks  before  the  credits  appeared  on  the  books  and  in  some 
cases  no  credits  had  been  entered. 

The  manager  immediately  requested  Leroy  Swift,  a  certified  public  accountant, 
to  make  a  thorough  audit.  Among  other  things,  the  accountant's  report  dis- 
closed the  following: 

The  petty  cash  sales  had  been  entered  in  the  Cash  Book  at  smaller  amounts 
than  the  records  showed.  The  discrepancy  between  Cash  Book  and  sales  records 
were,  Trunks,  $1,040;  Bags,  $360. 

Freight  bills  had  been  raised  $300.  The  Railroad  Company  had  been  overpaid 
this  amount  but  refunded  it  on  the  request  of  our  bookkeeper,  S.  O.  Bright,  who 
cashed  the  checks  and  retained  the  money. 

The  Customers'  column  and  Net  Cash  column  in  the  Cash  Book  were  short 
footed  $8,430.  To  make  the  balance  in  the  Customers'  Controlling  Account  agree 
with  the  total  of  the  individual  accounts,  the  Sales  Book  was  short-footed  the 
same  amount — Bags,  $2,790  and  Trunks,  $5,640. 

Credits  to  customers  accounts  in  the  amount  of  $4,740  were  missing.  Not  a 
trace  of  a  record  for  this  amount  or  any  part  thereof  could  be  found  in  any  book. 

Leather  novelties  amounting  to  $1,560  had  been  sold  from  the  National  Novelty 
Co.'s  consignment  but  no  remittance  had  been  made.  The  only  record  of  the 
transactions  were  duplicate  bills  of  the  sales  made.  The  money  received  for 
these  sales  had  not  been  deposited  and  was  appropriated  by  the  embezzler. 

Nine  productive  labor  pay-rolls  had  been  over-footed  $100  each. 

A  $1,000  note  receivable  had  been  transferred  by  forged  indorsement  as  $950 
part  payment  on  a  $1,300  automobile  bought  by  the  embezzler  for  his  personal 
use. 

Checks  for  $1,800  were  drawn  to  the  order  of  fictitious  creditors.  The  indorse- 
ments were  forged  by  Bright  and  the  checks  duly  passed  through  the  bank. 

The  relatives  and  friends  of  Bright  agreed  to  repay  the  company  the  greater 
part  or  all  of  the  losses  due  to  his  embezzlement.  In  order  to  provide  funds  for 
immediate  needs  the  present  stockholders  donate  20%  of  their  present  holdings 
of  stock. 

i.  Prepare  journal  entries  to  give  effect  to  the  foregoing  as  of  December  13, 
1909. 


PROBLEM  XV 

The  City  of  Oswego  donated  to  the  Ironclad  Trunk  Corporation  a  building  site 
having  a  market  value  of  $40,000,  on  condition  that  the  company  build  a  factory 
worth  at  least  $100,000  and  operate  at  least  five  years,  employing  not  less  than 
100  factory  operators. 

To  take  advantage  of  this  offer  the  corporation  obtained  permission  to  issue 
$100,000  of  7%  cumulative  preferred  stock  having  a  par  value  of  $100  per  share, 
dividends  payable  semi-annually.  A  condition  of  the  issue  made  the  stock 
redeemable  by  lot  at  the  call  of  the  company,  the  shareholder  having  the  option 
of  receiving  no  in  cash  or  120  in  common  stock. 

A  redemption  fund  is  to  be  created  out  of  profits  at  the  rate  of  20%  per  year. 

The  entire  issue  was  sold  for  cash  May  I,  1910,  at  iooj^.  On  the  same  day  101 
Blue  Valley  R.  R.  4%  bonds  were  purchased  at  98  with  accumulated  interest. 
The  bonds  are  payable  July  I,  1920.  Interest  payable  January  I  and  July  I. 
The  entire  bond  investment  was  set  aside  as  a  building  fund. 

Record  as  of  July  31,  1910,  the  transactions  that  took  place  in  connection  with 
the  erection  of  the  building  and  the  removal  from  the  old  to  the  new  plant. 

The  corporation  paid  taxes  of  $400  on  the  building  site  and  partially  com- 
pleted building.  Of  this  amount  $100  applied  to  the  uncompleted  building. 
During  the  period  the  manager  devoted  two-thirds  of  his  time  to  superintending 
building  operations  and  one-third  to  supervising  installation  of  machinery  and 
equipment.  His  salary  amounted  to  $3,000. 

The  old  land  and  building  and  part  of  the  machinery  was  sold  to  the  American 
Harness  Company  for  $49,000,  payable  $11,000  in  cash  and  the  balance  covered 
by  mortgage  for  five  years  at  6%.  The  amount  of  the  sale  was  distributed — 
land,  $12,000;  building,  $29,000;  machinery  and  tools,  $8,000.  At  the  date  of 
the  sale  the  accounts  appeared  on  the  books  as  follows:  Land,  $10,000;  Build- 
ings, $31,000  with  a  reserve  of  $3,000  and  nine  months  depreciation  on  a  5% 
basis  still  to  be  provided  for;  Machinery  and  Tools,  $25,000  with  a  reserve  for 
depreciation  of  $2,500.  The  machinery  and  tools  sold  cost  $12,000,  on  which 
depreciation  has  been  booked  for  one  year  at  10%  on  original  cost.  Take  into 
consideration  an  additional  period  of  nine  months. 

The  remaining  machinery,  having  been  designed  especially  for  our  use,  could 
not  be  sold  for  more  than  one-half  its  cost;  accordingly,  the  directors  had  the 
machines  moved  to  the  new  plant.  The  old  machines  appear  on  the  books  at  a 
cost  of  $13,000,  with  reserve  recorded  for  one  year  at  10%  and  nine  months 
depreciation  still  to  be  booked.  Additional  expenses  of  removing  were  as  follows: 
Dismantling,  $40;  crating,  drayage  and  freight,  $170;  labor  for  setting  up 
machines,  $60;  superintendent's  time  for  moving  and  installation,  $150. 

The  manager,  not  being  sure  as  to  the  amount  at  which  to  book  the  machinery, 
obtained  an  estimate  to  duplicate  this  particular  machinery  and  put  it  in  running 
order  for  $9,000. 

1.  Write  the  journal  entries  to  place  the  above  data  on  the  company's  books. 

2.  Explain  briefly  the  theory  underlying  your  treatment  of  the  old  machinery 
transferred  to  the  new  plant. 


PROBLEM  XVI 


$1,400.00 
1,500.00 
3,000.00 


2,613.07 


The  Directors  of  the  Ironclad  Trunk  Corporation,  after  receiving  full  authority 

from  the  stockholders,  set  December  3ist  as  the  close  of  the  fiscal  year,  thereby 
making  the  present  fiscal  period  fourteen  months  instead  of  one  year. 

From  the  following  trial  balance  and  supplementary  data  prepare 

1.  Classified  Balance  Sheet. 

2.  Income  Statement. 

TRIAL  BALANCE,  DECEMBER  31,  1914 

Land  Donated  $40,000.00 

Buildings  120,000.00 

Machinery  47 ,000 .  oo 

Tools  4,680 .  oo 

Delivery  Equipment  5,900.00 

Furniture  and  Fixtures  2,300.00 

Patents  108,000.00 

Loans  to  Employees  6,320 .  oo 

Dividend  No.  6 — Cum.  Pfd.  Stock— Payable  1/10/15 

Dividends — No.  7 — Preferred  Stock — Payable  1/10/15 

Dividend  No.  8 — Common  Stock — Payable  1/10/15 

Interest  Accrued  on  Bonds  Receivable  3,200.00 

Freight  Inward  4,334  •  82 

Freight  and  Express  Outward 

Royal  Leather  Preferred  Stock  (100  shares)  7,480.00 

Fire  Loss  6,000.00 

Strike  Loss  4,200 .  oo 

Credit  Dept.  Expenses  2,950.40 

Pamphlets,  Price  Lists  and  Posters  973 .  oo 

Advertising  Space  Prepaid  260.00 

Advertising  731.40 

Directors'  Fees  200 .  oo 

Entertainment  of  Customers'  Agents  174.50 

Charity  60 .  oo 

Workmen's  Compensation  Insurance  Premiums  640.00 

Rent  from  Houses  for  Employees 

Maintenance  of  Houses  for  Employees  318.30 

Watchmen's  Wages  700.00 

Bonuses  Paid  to  Employees  1,980.10 

Experimental  Expense  2,300.00 

Contingent  Royalties  2,140.00 

Mercantile  Agency  Reports  80.00 

Accounting  Expense  500.00 

Legal  Expenses  300.00 

Claims  Against  Transportation  Companies  3,792.00 

Bright — Special  1 4,500 .  oo 

Suspense  370 . oo 


2,390.00 


Delivery  Expense  $ i ,  1 94 . 50 

Due  to  Consignors  $4,387 . 20 

Imprest  Cash  200.00 

Raw  Materials  Inventory  10/31/13  21 ,304 .  oo 

Customers  88,946 . 63 

Finished  Goods  Inventory  10/31/13  22,100.00 

Notes  Receivable  18,000.00 

Notes  Receivable  Discounted  3,460.00 

Insurance  Prepaid  200.00 

Insurance  480.00 

Raw  Materials  Purchases  240,000.00 

Accrued  Office  Salaries  760.40 

Accrued  Taxes  1,220.00 

Accrued  Advertising  190.00 

Sales — Trunks  396,775 .  oo 

Sales— Bags  93,5 1 8. 80 

Returned  Sales — Trunks  1,750.00 

Returned  Sales— Bags  6 1 9 .  oo 

Returned  Purchases — Raw  Material  2,320.00 

Returned  Purchases — Bags  974 -OO 

Factory  Supplies  2,436 . oo 

Labor — Direct  78,751.20 

Labor — I  ndirect  3 ,497 .  oo 

Superintendence  3,200 .  oo 

Heat,  Light  &  Power  Service  7,147 . 10 

Miscellaneous  Factory  Expense  283 . 14 

Creditors  40,309.00 

Reserve  for  Depreciation  of  Buildings  5%  13,810.00 

Reserve  for  Depreciation  of  Machinery  10%  18,411 .00 

Reserve  for  Depreciation  of  Delivery  Equipment  12%  2,300.00 

Reserve  for  Depreciation  of  Furniture  and  Fixtures  12%  750.00 

Reserve  for  Expiration  of  Patents  21,000.00 

Reserve  for  Sinking  Fund — Bonds  of  1924  27,049.71 

Reserve  for  Contingent  Royalties  2,140.00 

Reserve  for  Supercession  of  Patents  20,000 .  oo 

Interest  Earned  7,810.00 

Interest  Paid  11,200.00 

Office  Expense  1,873.38 

Delivery  Expense  1 ,  1 43 . 26 

Salesmen's  Salaries  4,500.00 

Salesmen's  Commissions  12,305 . 40 

Repairs  to  Machinery  1,748.80 

Repairs  to  Buildings  3,755  •  50 

Reserve  for  Doubtful  Accounts  3,330.70 

Discount  on  Purchases  3,75*  -3O 

Discount  on  Sales  6,400.00 


Office  Salaries  $7,974  •  oo 

Provision  for  Doubtful  Accounts  2,379.12 

Capital  Stock — Cumulative  Preferred  $100,000.00 

Capital  Stock — Preferred  50,000 .  oo 

Capital  Stock — Common  200,000 .  oo 

Unissued  Stock — Common  10,000.00 

Treasury  Stock — Common  40,000 .  oo 

Assessment  for  Street  Improvements  2,000.00 

Bonding  Employees — Office  200 .  oo 

Surplus  35,662.16 

Drawings  and  Patterns  4,606 .  oo 

Mortgage  Receivable  38,000.00 

Accrued  Payroll  957-75 

Reserve  for  Land  Donated  40,000 .  oo 

Bonds  Payable  100,000.00 

Employees  Pension  Fund  47,500.00 

Reserve  for  Employees  Pension  Fund  47,500.00 

Discount  on  Bonds  Payable  1 ,600 .  oo 

Wrapping  and  Crating  Supplies  1,418.90 

Ralston  National  Bank  17,841.53 

Sinking  Fund — Bonds  of  1924  27,049.71 

Redemption  Fund — Cumulative  Preferred  Stock  80,000 .  oo 

Reserve  for  Redemption  of  Cumulative  Preferred  Stock  80,000 .  oo 

Houses  and  Land  for  Employees  24,600 .  oo 

Purchases — Bags  9 1 ,360 .  oo 

Trunks  in  Process  10/31/13  4,984.20 

Commissions  Earned  564 . 80 

Notes  Payable  7 , 1 08 .  oo 

Taxes  1,520.00 

Accrued  Interest  Receivable  250.00 


>337,332.  89  i, 


Supplementary  data  : 

A  careful  investigation  disclosed  the  following: 

Interim  dividends  had  been  paid  May  15,  1914.  Dividend  No.  5,  Cumulative 
Preferred  Stock,  $1,400;  No.  6,  Preferred  Stock,  $1,500;  No.  7,  Common  Stock, 
$3,000. 

The  Royal  Leather  Co.  stock  now  has  a  market  value  of  $90  per  share. 

Items  to  be  distributed: 

Account  Distribution 

Light  Heat  and  Power—  Selling,  $842.90;  Office,  $392. 
Accrued  Payroll  —  Direct,  $683.45;   Indirect,  $274.30. 

Freight  Inward  —  Materials,  y^\   Bags,  ><. 

Taxes  —  Building  and  Equipment,  $1,300;  Employees  Houses, 

$220. 


The  Suspense  account  was  credited  for  $370  received  from  a  former  customer  in 
payment  of  an  old  account  which  had  been  charged  off  as  uncollectible  some 
years  ago. 

In  many  cases  Notes  Payable  have  been  issued  with  interest  included  in  the 
face  of  the  notes.  Of  this  interest  $290  is  applicable  to  the  succeeding  period. 

Provision  for  Contingent  Royalties  was  begun  two  years  ago  in  anticipation 
of  an  unfavorable  decision  in  an  action  brought  against  us  for  infringement  of 
patents.  Recently  the  action  was  decided  in  our  favor. 

Legal  expenses  of  $1,500  for  prosecution  of  infringements  of  patents  had  been 
charged  against  profits  at  the  close  of  the  previous  year.  Of  the  present  legal 
expenses,  $100  was  paid  for  services  in  protecting  patents. 

Inventories  as  at  December  31,  1914: 

Wrapping  and  Crating  Supplies  unused  $387  •  5° 

Factory  Supplies  on  hand  718 . 50 

Pamphlets,  Price  Lists  and  Posters  on  hand  450 .  oo 

Workmen's  Compensation  Insurance  prepaid  160.00 

Bags  in  Stock  12,542 .00 

Trunks  in  Stock  28,050 .  oo 

Trunks  in  process  as  under: 

Materials,    $6,497.10;     Direct    Labor,    $2,680.40;     Manufacturing 
Expense,  $976.50. 

Fire  Loss  was  debited  for  $6,000  which  represents  the  net  damage  to  Buildings 
of  $4,000  and  loss  of  Machinery  of  $2,000  after  making  due  allowance  for  depreci- 
ation. Just  after  the  trial  balance  was  made  a  check  for  $5,400  was  received  from 
the  insurance  company  in  full  settlement  of  our  claims  for  fire  damage. 

The  Repairs  to  Buildings  account  contains  $3,500  of  charges  for  replacing  the 
parts  destroyed  by  fire. 

Provision  for  reserve  for  depreciation  is  to  be  made  at  the  following  yearly  rate: 

Buildings,  5%;  Machinery,  10%;  Delivery  Equipment,  12%;  Furniture  and 
Fixtures,  12%. 

It  was  deemed  advisable  to  write  off  20%  of  the  accounts  of  Tools,  and  Drawings 
and  Patterns.  Also,  to  reserve  from  profits  $2,000  for  supercession  of  patents 
in  addition  to  providing  for  the  reduction  in  the  life  of  the  patent. 

Interest  has  accrued  on  bonds  payable  for  one  month. 

Bright — Special  account  shows  the  balance  due  on  Bright's  embezzlement. 
The  company  holds  collateral  in  the  form  of  stock  for  the  full  amount  of  the 
account. 


PROBLEM  XVII 

From  the  information  furnished  in  Problem  XVI : 

1.  Construct  a  Surplus  Statement. 

2.  Write  the  adjusting  and  closing  journal  entries. 

3.  What  changes  would  you  introduce  in  the  accounting  system  to  place  it 
on  a  cost  basis?   Illustrate  by  means  of  skeleton  ledger  accounts,  using  the  figures 
given  in  Problem  XVI. 


PROBLEM  XVIII 


Sometime  ago  the  stockholders  of  the  Ironclad  Trunk  Corporation  and  the 
Randall  Manufacturing  Company  appointed  committees  on  merger.  At  a  joint 
meeting  of  the  two  committees  a  plan  for  merger  of  the  two  companies  was 
adopted.  The  stockholders  of  the  respective  companies  accepted  the  plan  of  the 
joint  committee  and  instructed  and  authorized  their  boards  of  directors  to  carry 
out  the  terms  of  the  merger.  The  agreement  provided  that  a  new  corporation 
be  formed  to  acquire  the  assets  and  assume  the  liabilities  of  the  two  companies 
as  shown  on  their  balance  sheets  of  December  31,  1914,  except  as  noted. 

For  the  Ironclad  Trunk  Corporation  (see  Problem  No.  16),  the  machinery, 
tools  and  delivery  equipment  were  taken  over  at  a  reduction  of  10%,  and  the 
Royal  Leather  Preferred  Stock  was  accepted  at  $85  per  share.  The  surplus  was 
reduced  to  even  multiples  of  $10,000. 

The  balance  sheet  submitted  for  the  Randall  Mfg.  Co.  has  been  adjusted  to 
meet  the  conditions  of  the  merger  agreement. 


RANDALL   MFG.   CO., 


Assets 
Land 

Machinery 
Tools 

Motor  Trucks 
Furniture  and  Fixtures 
Patents 
Raw  Material 
Goods  in  Process 
Finished  Goods 
Cash 

Notes  Receivable 
Accounts  Receivable 


BALANCE   SHEET,    DEC.   31,  1914 

Liabilities 

Accounts  Payable  $35,800.00 

Notes  Payable  20,000 .  oo 

Wages  Payable  2,000.00 

Interest  Accrued  1,000.00 

Reserve  for  Bad  Debts  1,200.00 

Bonds  Payable  (5%)  100,000.00 

Capital  Stock — Preferred  50,000 .  oo 

Capital  Stock — Common  100,000.00 

Surplus  40,000 .  oo 
Profits  for  the  current  year 
were  $30,000 


$90,000 .  oo 
70,000 .  oo 
10,000.00 
12,000.00 

3,000.00 
60,000 .  oo 
14,000.00 

8,000 .  oo 
19,000.00 

8,000 .  oo 
16,000.00 
40,000 .  oo 

350,000.00 


350,000 .  oo 


After  making  the  adjustments  and  allowing  interest  at  6%  on  the  invested 
capital,  the  excess  earnings  for  the  last  period,  in  even  thousands  of  dollars — not 
to  exceed  $30,000  for  each  company — were  capitalized  on  a  10%  basis. 

To  carry  out  the  plan  of  the  merger  the  Sterling  Trunk  Corporation  was 
organized  with  sufficient  capital  in  7%  cumulative  preferred  stock  and  common 
stock  to  acquire  the  two  other  companies. 

1.  Submit  a  statement  showing  the  capitalization  of  the  Sterling  Trunk 
Corporation  and  the  distribution  of  the  capital  stock  to  the  other  companies 
on  an  equitable  basis. 

2.  Prepare  the  balance  sheet  of  the  Sterling  Trunk  Corporation  as  of  Decem- 
ber 31,  1914. 


PROBLEM  XIX 


The  Sterling  Trunk  Corporation,  hoping  to  recoup  excessive  trade  losses, 
engaged  in  the  manufacture  of  war  supplies.  Instead  of  realizing  the  enormous 
anticipated  profits,  they  sustained  a  severe  loss  through  an  explosion  followed 
by  a  disastrous  fire  on  August  I,  1916.  The  assets  destroyed  were  only  partially 
protected  by  insurance  because  of  difficulty  in  getting  a  reasonable  rate.  Also 
some  policies  which  had  expired  had  not  been  renewed  before  the  explosion. 

The  following  information  was  accepted  by  the  insurance  companies  as  a 
basis  for  settlement: 

Date  of  policies  January  I,  1916. 


Reserve 

Amount 

Unex- 

Co-In- 

Name of 

Original 

for 

Yearly 

of  Prop- 

pired 

surance 

Property 
Insured 

Value  of 
the 

Depreci- 
ation 

Rate  of 
Depreci- 

Face of 
Policy 

erty  de- 
stroyed 

Premium 
on  Policy 

Clause 
in  the 

Property 

Jan.  i, 

ation 

Aug.  i, 

Aug.  i, 

Policy 

1916 

1916 

1916 

Buildings 

$110,000 

$10,500 

5% 

$30,000 

$80,000 

$200 

80% 

Machinery 

76,000 

14,000 

10% 

20,000 

tf 

150 

100% 

Furniture  & 

Fixtures 

4,700 

1,200 

12% 

4,000 

70% 

10 

80% 

Patterns    & 

Drawings 

3,500 

20% 

1500 

All 

None 

60% 

*Finished 

Goods 

16,400 

80% 

90% 

120 

80% 

of  selling 

of  selling 

price 

price 

The  finished  goods*  were  listed  at  the  factory  cost  but  the  policy  covered  the 
selling  price  which  was  based  on  a  profit  of  60%  on  the  factory  cost  with  10% 
on  sales  added  for  selling  expenses. 

1.  What  is  the  effect  of  the  co-insurance  clause? 

2.  Determine  the  amount  received  from  the  insurance  companies  for  each 
asset. 

3.  Indicate,  by  means  of  journal  entries,  the  effect  on  the  various  accounts 
involved  in  the  settlement  of  the  losses. 


PROBLEM  XX 

The  European  war  caused  a  reduction  in  the  income  of  the  trunk  company  by 
an  abrupt  falling  off  of  sales;  also  as  a  result  of  the  rapid  increase  in  materials 
several  contracts  were  completed  at  a  loss.  These  losses  together  with  the 
unexpected  loss  by  fire  placed  the  company  in  an  embarrassing  financial  condi- 
tion. There  was  great  pressure  from  bondholders  because  the  interest  for  the 
last  year  had  not  been  paid  and  dissatisfaction  among  stockholders  because 
dividends  had  been  passed.  Current  debts  could  not  be  met  and  it  was  clearly 
evident  that  the  business  could  not  continue  long  in  its  present  condition.  To 
remedy  this  a  meeting  of  the  stockholders  was  called  and  a  committee  on  reor- 
ganization appointed.  The  recommendations  of  the  committee,  which  are 
given  below,  were  put  into  effect  on  December  31,  1916. 

The  holders  of  the  1 5-year  5%  sinking  fund  bonds  issued  in  1909  were  given 
one  share  of  new  cumulative  7%  preferred  stock  for  each  bond  in  payment  of 
defaulted  interest.  The  holders  of  the  $100,000  of  5%  bonds  assumed  for  Randall 
Mfg.  Co.  contributed  in  cash  5%  of  the  amount  of  their  bonds  and  received  for 
each  $1,000  bond  a  new  $500  bond  bearing  5%  interest  and  $700  in  non-cumula- 
tive 6%  preferred  stock.  The  holders  of  $60,000  in  6%  bonds  issued  to  operate 
the  war  munitions  plant  received  for  each  $1,000  bond  $600  in  6%  preferred 
stock  and  $500  in  common  stock.  The  old  cumulative  preferred  stockholders 
were  given  new  non-cumulative  preferred  stock.  The  old  common  stockholders 
were  given  new  common  stock  and  were  assessed  $20  per  share  for  which  they 
were  given  new  preferred  stock. 

1.  Determine  the  amount  of  cash,  bonds  and  various  classes  of  stock  to 
carry  into  effect  the  reorganization. 

2.  Present  the  journal  entries  necessary  to  record  this  data. 


PROBLEM  XXI 

Use  the  following  instructions  as  a  guide  in  preparing  a  special  report  on  a 
business  with  which  you  are  familiar,  either  by  experience  or  through  investi- 
gation. 

A.  Write  a  short  history  of  the  business,  giving 

1.  Title 

2.  Character  of  business  in  which  engaged 

3.  Date  of  beginning  and  amount  of  capital  invested 

4.  Successive  changes  affecting 

a.  The  ownership  (individual,  partnership  or  corporate) 

b.  The  amount  of  capital 

c.  The  character  of  the  business  in  which  engaged 

B.  Submit 

1 .  A  trial  balance  at  the  close  of  a  fiscal  period 

2.  A  balance  sheet  for  the  same  period 

3.  A  profit  and  loss  statement  for  the  same  period 

4.  Adjusting  and  closing  journal  entries  for  the  same  period. 

Note — If  possible,  give  i,  2,  3,  for  two  successive  periods  and  prepare 
a  comparative  balance  sheet  and  profit  and  loss  statement. 

C.  Prepare 

1.  A  list  of  the  different  books  and  blanks  used  to  record  the  financial 

transactions 

2.  A  sample  page  or  blank  or  a  copy  of  each  item  listed  under  i . 

Note — If  the  copy  should  require  a  great  deal  of  space,  simply  give  the 
form  of  ruling,  headings  and  size  of  page. 

D.  Write  one  or  two  typical  entries  in  each  book  and  show  the  form  of  closing 

in  actual  use. 

E.  As  a  separate  problem 

1.  Outline  the  course  of  an  article  from  the  time  the  order  is  placed  until 

the  goods  reach  you.    This  would  be  a  Purchase  Department  record. 

2.  Outline  the  course  of  an  article  from  the  time  you  receive  the  order  until 

the  goods  reach  your  customer.    This  would  be  a  Sales  Department 
record. 

Note — For  both  i  and  2  attach  actual  forms  used  or  copy  of  same, 
if  possible. 

F.  Information  in  regard  to 

1.  Terms  of  sale 

2.  Treatment  of  C.  O.  D.  or  approval  sales  on  the  books 

3.  Treatment  of  freight  inward  on  the  books 

4.  Treatment  of  freight  outward  on  the  books 

5.  Treatment  of  accounts  for  containers  or  boxes  to  be  returned  by  your 

firm.     By  your  customers 

6.  Treatment  of  Petty  Cash.     If  this  has  not  been  furnished  under  C.  2, 

give  sample  page  of  petty  cash 


7-  Treatment  of  consigned  goods  on  the  books 

8.  Closing  journal  entries.     If  this  has  been  furnished  under  B.  4,  omit 

9.  Treatment  of  installment  sales 

10.  Pay  Roll  system 

1 1 .  Your  method  of  entering  payment  from  customers 

12.  Provision  for  bad  debts 

13.  Method  of  providing  for  depreciation.     Give  an  example 

14.  Provision  for  redemption  of  bonds  payable 

15.  Interest  on  daily  or  other  balances 

1 6.  Proportional  discount 

17.  Assignment  of  accounts  receivable 

1 8.  Use  of  check  figures 

19.  Number  of  customers 

20.  Amount  of  gross  sales 

21.  Amount  of  gross  purchases 

22.  Methods  of  obtaining  inventories  and  basis  for  valuation 

23.  Usual  gross  profit 

24.  Usual  gross  expense 

25.  Figuring  profits.    On  selling  price  or  cost  price 

26.  Figuring  expenses.     On  selling  price  or  cost  price 

27.  Use  of  selling  or  expense  charts  or  charts  of  any  other  kind 

28.  Insurance  carried  and  manner  in  which  it  is  written  off 

29.  System  of  branch  or  agency  accounts 

30.  Nature  of  items  found  in  allowances 

31.  Use  of  mechanical  appliances  in  offices 

32.  Filing  systems,  other  than  for  correspondence 

33.  Frequency  of  audits  by 

a.  Firm's  staff 

b.  Outside  parties 

34.  Cost  system  in  use 

35.  Date  of  installation  of  present  system 

36.  Rate  of  turnover 

37.  Treatment  of  cash  sales 
G.  Give 

1.  Adverse  criticism  of  any  department  or  part  of  same  which  you  know 

from  actual  experience  does  not  work  out  as  it  should 

2.  Your  opinion  as  to  the  cause 

H.  Constructive  criticism  of  any  department  or  part  of  same  which  you  think 
would  make  it  more  effective  or  less  expensive  if  conducted  according 
to  your  plan 

I.  Anything  peculiar  to  your  business  which  has  not  been  included  in  any  of 
the  previous  divisions 


PROBLEM  XXII 

1.  Illustrate  and  explain  the  steps  to  be  taken  to  change  a  Single  Entry  set  of 
books  to  Double  Entry  and  continue  the  use  of  the  old  ledger.    The  Single  Entry 
ledger  contained  a  Merchandise  account  and  an  Expense  account  in  addition  to 
the  customers'  and  creditors'  accounts. 

2.  The  firm  of  Smith  and  Hart  has  a  net  capital  of  $24,000  of  which  Smith's 
share  is  $14,000  and  Hart's  $10,000.    Jones  pays  them  $10,000  for  one-third  inter- 
est in  the  firm.    Write  the  journal  entries  to  record  the  transaction  on  the  books 
of  the  partnership. 

3.  The  partnership  of  Lewis  and  Porter  is  insolvent.    The  articles  of  partner- 
ship state  that  Lewis  contributed  for  his  partnership  investment  the  stock  of 
goods  from  his  former  business  at  an  estimated  value  of  $18,000.     The  goods 
were  very  much  out  of  date  and  shopworn,  and  finally  were  sold  for  $3,600. 
Porter  contributed  $5,000  in  cash.    After  settling  the  claims  of  the  firm's  creditors, 
$1,000  in  cash  remained.     Show  the  partners'  accounts  and  explain  the  distri- 
bution of  the  $1,000  and  the  final  adjustment  between  the  partners. 

4.  Name  three  economic  elements  in  the  profits  of  a  business  and  explain  how 
each  may  be  expressed  on  the  books  of  a  partnership. 

5.  You  have  open  on  your  ledger  a  Consignment  Inward  account  which  shows 
only  a  credit  item  of  $500  for  sales.    You  are  entitled  to  a  commission  of  5%. 
How  would  you  classify  this  account  on  your  Balance  Sheet,  and  at  what  amount? 
Give  reasons  for  your  answer. 

6.  Prepare  a  cost  formula  and  illustrate  the  relation  of  the  different  elements 
by  means  of  a  diagram. 


PROBLEM   XXIII 

From  the  following  items  prepare  Trial  Balance,  Profit  and  Loss  Account  and 
Balance  Sheet.  Also  find  present  capital  and  prove  the  gain  as  shown  by  the 
Profit  and  Loss  Account. 

Cash  $7,ooo 

Sales  21,000 

Purchases  17,000 

Inventory  9,000 

Discounts  Gained  180 

Real  Estate  8,000 

Accounts  Payable  9,000 

Discounts  Lost  220 

Surplus  1,850 

Expense  750 

Notes  Payable  1,100 

Accounts  Receivable  6,000 

Profit  and  Loss  (Credit)  700 

Drawings  1,500 

Notes  Receivable  1,300 

Charles  H.  Spencer  (Proprietor)  8,000 
Present  Inventory,   $7,000 

A  Trial  Balance  made  from  these  items  will  not  balance.  The  student  is  to 
complete  the  balance  and  prepare  the  statements  asked  for  at  the  beginning  of 
this  problem. 


PROBLEM   XXIV 

Wm.  Bates  commenced  business  June  I,  1908,  with  a  capital  consisting  of 
cash  $60,000,  and  a  building  and  lot  worth  $85,000,  subject  to  a  mortgage  of 
$25,000,  dated  June  i,  1908,  bearing  interest  at  6%. 

One  year  later,  June  i,  1909,  an  abstract  of  his  books  disclosed  the  following 
accounts : 

Purchases,  $78,000;  sales,  $85,000;  sinking  fund,  $8,000;  cash  drawings, 
$6,000;  goods  returned  to  creditors,  $5,000;  expenses  paid  in  cash,  $9,000; 
profit  and  loss,  debit,  $3,500;  contingent  fund,  $3,000;  due  to  creditors,  $49,000; 
reserve  for  bad  debts,  $4,250;  due  from  customers,  $32,620;  discounts  allowed 
customers  on  accounts  paid,  $755;  returned  sales,  $4,520;  discounts  on  ac- 
counts paid  to  creditors,  $650. 

No  goods  were  sold  to  creditors  or  purchased  from  customers. 

Unsold  goods  June  i,  1909,  $9,500. 

From  the  above  data,  prepare  a  Trial  Balance,  Income  Statement,  and  Balance 
Sheet. 

Note:   Two  items  affecting  accounts  in  the  trial  balance  are  missing  and  must  be 
supplied. 


PROBLEM   XXV 

In  taking  off  a  trial  balance  a  bookkeeper  finds  that  his  debit  footings  exceed 
the  credit  by  $131.56,  which  he  carried  to  a  suspense  account.  Later,  he  dis- 
covers that  a  purchase  amounting  to  $417.50  has  been  debited  to  a  creditor  as 
$192.94;  that  $312.50  for  depreciation  of  furniture  has  not  been  posted  to  depre- 
ciation account;  that  $500  withdrawn  by  the  proprietor  has  been  charged 
against  wages  account;  that  a  discount  of  $76.13  allowed  to  a  customer  has  been 
credited  to  him  as  $71.13,  and  that  the  total  of  sales  returned  was  footed  $5.00 
short.  Give  detailed  entries  showing  how  you  would  remedy  these  errors,  and 
starting  with  the  original  difference  prepare  a  supplemental  trial  balance  show- 
ing whether  the  books  balance  or  not. 
Illinois,  1910. 


PROBLEM   XXVI 

A  partnership  on  equal  terms  between  A  and  B  is  dissolved  July  i,  1897,  the 
books  on  that  date  showing  the  following: 

A's  capital  paid  in  was  $16,000,  and  his  drawings  were  $3,500;  B's  capital  paid 
in  was  $2,000,  and  his  drawings  were  $1,500.  Goods  purchased,  $50,000;  sales, 
$40,000;  business  expenses,  $1,800.  A  loss  of  $1,600  was  made  on  a  $5,000 
consignment  of  goods  to  Liverpool.  In  the  settlement  A  agrees  to  pay  B  an  old 
debt  of  $3,500.  Prepare  requisite  accounts,  and  show  final  balance  payable  by 
one  partner  to  the  other. 
New  York,  1898. 


PROBLEM   XXVII 

A  corporation's  balance  sheets  for  August,  1907,  and  September,  1907,  were 
respectively  as  follows: 

ASSETS:  August,  1907. 

Plant  and  Equipment  $4,000,000.00 

Furniture  6,000.00 

Tools  3,000.00 

Stable  3,811.28 

Cash  15,250.36 

Material  Supplies  30,750.28 

Accounts  Receivable  28,920.13 

Unexpired  Insurance  510.29 

Total  $4,088,242.34 

LIABILITIES: 

Capital  Stock  $2,500,000.00 

Bonds  1,350,000.00 

Accounts  Payable  31,336.28 

Bills  Payable  26,240.12 

Accrued  Taxes  3,500.00 

Accrued  Interest  5,625.00 

Profit  and  Loss  171,540.94 

Total  $4,088,242.34 

ASSETS:  September,  1907. 

Plant  and  Equipment  $4,012,310.21 

Furniture  6,205.58 

Tools  3,218.86 

Stable  4,009.37 

Cash  8,328.29 

Material  Supplies  39,280.17 

Accounts  Receivable  32,321.83 

Unexpired  Insurance  832.12 

Total  $4,106,506.43 

LIABILITIES: 

Capital  Stock  $2,500,000.00 

Bonds  1,362,000.00 

Accounts  Payable  33,445-57 

Bills  Payable  18,240.12 

Accrued  Taxes  4,000.00 

Accrued  Interest  11,250.00 

Profit  and  Loss  177,570.72 

Total  $4,106,506.43 

Analyze  the  differences  in  the  corresponding  accounts  for  the  period  and  show 
disposition  of  increased  resources. 
Illinois,  1907. 


PROBLEM   XXVIII 


The  trading  accounts  of  a  company  covering  two  years  are  herewith  submitted. 
Analyze  the  accounts  and  make  a  report  to  the  company  showing  the  reasons 
for  the  difference  in  results. 


1908 


Mdse.  inventory  1/1/08 
Mdse.  purchases 
Mdse.  sales  (travelers) 
Mdse.  sales  (domestic) 
Mdse.  sales  (cash) 
Commissions  paid  travelers 
Salaries  paid  travelers 
Salaries  (domestic  sales) 
Rental 

Stationery,  etc. 
Expense 
Interest 
Inventory  1/1/09 


Mdse.  inventory  1/1/09 
Mdse.  purchases 
Mdse.  sales  (travelers) 
Mdse.  sales  (domestic) 
Mdse.  sales  (cash) 
Commissions  paid  travelers 
Salaries  paid  travelers 
Salaries  (domestic  sales) 
Rental 

Stationery,  etc. 
Expense 
Interest 

Mdse.  inventory  i/i/io 
Penna.,  igog. 


1909 


$150,000 

633,000 

600,000 

150,000 

10,000 

30,000 

30,000 

15,000 

5,000 

3,ooo 

22,000 

4,OOO 

$125,000 


$I25,OOO 

600,OOO 

6OO,OOO 

I50,OOO 

IO,OOO 

30,OOO 

10,000 

IO,OOO 

5,000 

3,000 

15,000 

1,000 

$125,000 


PROBLEM   XXIX 

A  and  B  are  partners  carrying  on  a  business  in  Winnipeg.  On  January  i,  1910, 
after  adding  profits  for  the  past  half-year,  A's  capital  amounted  to  $150,000,  and 
B's  to  $100,000.  On  that  date  they  take  into  partnership  C,  upon  the  following 
terms,  viz. :  he  is  to  bring  in  capital  amounting  to  $25,000,  and  each  partner  is 
to  be  credited  with  interest  on  his  capital  at  6%  per  annum.  All  profits  (after 
debiting  interest)  up  to  $25,000  are  to  be  shared  by  A  and  B  exclusively  in  propor- 
tion to  the  amounts  of  their  capital  at  January  I,  1910.  All  profits  in  excess  of 
$25,000  are  to  be  shared  equally  by  the  three  partners.  Accounts  are  to  be  pre- 
pared and  profits  and  interest  credited  half-yearly.  C  is  to  be  credited  with  a 
salary  of  $5,000  per  annum.  On  June  30,  1910,  the  profits  divisible  after  debit- 
ing C's  salary,  which  he  has  drawn,  but  before  charging  interest  on  partner's 
capital  amounted  to  $75,000.  The  partners'  withdrawals  which  are  not  chargea- 
ble with  interest  were:  A,  $12,500;  B,  $10,000;  and  C,  $3,750.  Draw  up  part- 
ners' separate  accounts  as  they  should  stand  on  July  I,  1910. 

Assume  that  instead  of  a  profit  a  loss  of  $75,000  had  occurred.    How  would 
you  have  treated  it  in  the  accounts  in  the  absence  of  any  direct  provision  in  the 
partnership  agreement  relative  to  losses? 
Penna.,  1910. 


PROBLEM   XXX 

A,  B  and  C  were  partners  in  business  for  several  years.  A  died  December  31, 
1903.  The  articles  of  copartnership  provided  that  on  any  change  in  the  firm  the 
good  will  should  be  taken  into  account  and  its  value  divided — one-half  to  A  and 
one-quarter  each  to  B  and  C.  The  balance  sheet  at  the  date  of  A's  death  was 
as  follows: 

ASSETS 

Cash  $1,500 

Merchandise  on  hand  12,000 

Sundry  notes  and  accounts  receivable  15,000 

$28,500 

LIABILITIES 

Sundry  accounts  payable  $8,500 

A's  net  investment  10,000 

B's  net  investment  5,ooo 

C's  net  investment  5,ooo 

$28,500 

In  January,  1904,  B  and  C  arranged  with  D  to  come  into  the  firm  with  $5,000. 
The  good  will  is,  by  agreement,  to  be  valued  at  $3,000.  The  new  firm,  consisting  of 
B,  C  and  D,  takes  over  the  business  and  good  will  in  equal  shares,  subject  to  an 
allowance  of  2>£%  on  the  notes  and  accounts  receivable.  It  pays  the  estate  of 
A  $5,000,  with  the  understanding  that  the  balance  due  A's  estate  shall  remain 
as  a  loan  at  the  rate  of  5%  interest. 

Prepare  the  balance  sheet  and  the  capital  accounts  of  B,  C  and  D  as  they 
should  appear  at  the  beginning  of  the  new  business,  writing  off  the  purchase  of 
good  will  in  equal  proportions  to  the  amount  of  capital  invested. 
New  York,  1905. 


PROBLEM   XXXI 

Three  partners  contribute  capital  as  follows:  X,  $90,000;  Y,  $45,000;  Z, 
$15,000.  They  share  profits  in  the  proportion  of  X,  50%;  Y,  30%  Z,  20%. 
X's  salary  is  $5,000,  Y's  salary  is  $3,000,  Z's  salary  is  $2,000.  At  the  end  of 
their  fiscal  period  X  dies.  The  books  are  closed  and  the  net  assets  ascertained 
to  be  $152,500.  X  and  Y  liquidate  the  firm's  affairs  and  distribute  the  surplus 
assets  quarterly  as  follows: 

First  quarter  $42,410.20 

Second  quarter  74,622.30 

Third  quarter  31,967.50 

$149,000.00 

Prepare  a  statement  of  the  partners'  accounts,  showing  how  the  distribu- 
tion of  assets  should  be  made,  together  with  the  apportionment  of  the  loss. 
Give  your  authorities. 
New  York,   1914. 


PROBLEM   XXXII 

The  firm  of  Norton  and  Brown  decided  to  liquidate  at  a  time  when  their  con- 
dition, as  shown  by  the  Balance  Sheet  given  below,  was  still  solvent. 

BALANCE  SHEET,  MARCH  31,  1914 

Plant  and  Equipment              $20,000          Notes  Payable  $6,000 

Office  Furniture                            2,000          Accounts  Payable  17,000 

Inventory,  Material                    12,000          Norton,  Loan  a/c  5,ooo 

Notes  Receivable                          5,ooo          Brown,  Loan  a/c  3,ooo 

Accounts  Receivable                  29,000          Norton,  C/a  25,000 

Cash                                               3,ooo          Brown,  C/a  15,000 


$71,000  $71,000 

Profits  and  losses  were  shared  three-fourths  by  Norton  and  one-fourth  by 
Brown.  Interest  was  allowed  on  the  loan  accounts  but  not  on  the  capital  ac- 
counts. At  the  end  of  the  first  month,  April  30,  it  was  found  that  material 
inventoried  at  $5,000  had  produced  $3,600;  accounts  receivable  to  the  amount 
of  $15,000  had  been  collected  in  cash  and  $2,800  in  bad  debts  charged  off;  notes 
receivable  collected  in  cash  $2,000;  expenses  of  $600  had  been  paid  in  cash; 
equipment  valued  at  $4,000  produced  $3,000.  Interest  on  partners'  loan  ac- 
counts was  not  entered  this  month. 

During  the  month  ended  May  31,  office  furniture  valued  at  $1,600  was  sold 
for  $1,000.  Material  costing  $4,000  produced  $3,200  and  the  balance  of  material 
was  divided  equally  between  the  partners  at  cost.  Plant  equipment  listed  at 
$6,000  was  sold  for  $6,200.  A  $200  note  proved  worthless  and  was  charged  off. 
Accounts  receivable  to  the  amount  of  $6,065  arjd  notes  receivable  of  $2,000  were 
collected  in  cash.  Bad  debts  charged  off  $435.  Expenses  paid  in  cash  $300. 
Interest  was  credited  on  Norton's  loan  account  $40  and  Brown's  loan  account  $25. 

Arrange  your  solution  to  show: 

1.  Your  method  of  obtaining  the  proper  cash  distribution. 

2.  A  statement  showing  each  partner's  capital  and  loan  at  the  end  of  each 
month,  or  a  detailed  capital  and  loan  account  for  each  partner  with  a  balance 
entered  in  each  account  each  month. 

3.  A  Balance  Sheet  at  the  close  of  the  second  month. 


PROBLEM   XXXIII 

1.  Define  good  will.    When  should  the  item  be  placed  on  the  books?    Explain 
three  methods  for  determining  the  value  to  be  placed  on  good  will. 

2.  Explain  what  is  meant  by  par  value,  book  value,  market  value,  and  real 
value,  as  applied  to  the  capital  stock  of  a  corporation. 

3.  Name  three  general  classes  of  funds  and  explain  the  purpose  for  which 
each  is  established. 

4.  The  directors  of  a  corporation  having  bonds  outstanding  asked  your  advice 
in  regard  to  the  advisability  of  providing  a  sinking  fund  for  the  issue.     Give  in 
brief  your  argument  in  favor  of  establishing  the  sinking  fund. 

5.  (a)    Explain  five  methods  of  providing  for  depreciation  in  the  following 
proposition: 

Original  value  of  machine  $1,200 

Residual  value  of  machine  300 

Estimated  life,  five  (5)  years 

(b)   A  Reserve  for  Depreciation  of  $900  has  been  provided.    You  sold  the  old 
machine  for  $240  and  bought  a  new  machine  for  $1,400. 

Formulate  the  journal  entries  for  the  accounts  affected  as  a  result  of  selling  the 
old  machine  and  buying  the  new  one. 

6.  A  corporation  has  been  formed  with  a  capital  stock  of  $100,000,  all  of 
which  has  been  issued  for  value.     Subsequently  the  stockholders  make  a  pro 
rata  donation  of  100  shares  at  par,  $10,000,  for  the  purpose  of  providing  work- 
ing capital.     Of  this  stock  40  shares  were  sold  at  $90  and  20  shares  at  $105; 
the  balance  is  in  the  treasury.    Give  the  journal  entries  to  record  the  formation 
and  subsequent  entries  on  the  books  of  the  corporation. 


PROBLEM   XXXIV 

C.  C.  Carter  and  A.  D.  Walker  were  unable  to  meet  their  obligations.  From 
the  books  of  the  firm  and  additional  information  you  ascertained  the  following: 

Real  Estate  (estimated  to  produce  $18,000)  $20,000 

Subject  to  a  mortgage  of  $12,000 

Notes  Receivable  6,000 

Expense  7,820 

Furniture  and  Fixtures  (estimated  to  produce  $2,700)  3>5oo 

D.  L.  &  W.  Stock  (estimated  to  produce  $12,000)  14,000 

(Pledged  with  fully  secured  creditors.) 

Horse  and  Wagon  (estimated  to  produce  $500)  700 

Other  Securities  3,ooo 

Pledged  with  partially  secured  creditors 

Accounts  Receivable  5,400 

Good,  $3,000;   doubtful,  $1,800,  but  estimated  to  produce 

$1,440;  bad  $600) 

Notes  Payable  2,000 

Creditors,  unsecured  18,000 

Creditors,  partially  secured  8,000 

Creditors,  fully  secured  10^000 

Wages,  salaries  and  taxes,  preferred  by  law  560 

Carter,  C/a  15,000 

Walker,  C/a  5,000 

Carter,  D/a  (debit)  3,050 

Walker,  D/a  (debit)  1,000 

Cash  870 

Sundry  Losses  5,220 
Prepare  Statement  of  Affairs  and  Deficiency  Account  as  of  September  30,  1911. 


PROBLEM  XXXV 

On  December  i,  1907,  the  following  particulars  are  furnished  of  the  position  of 
John  Mapleton,  insolvent:  Factory  equipment  cost  $15,000.00,  estimated  to 
realize  $10,000.00.  Stock  of  finished  goods,  $10,000.00,  estimated  worth  $7,500.00. 
Material  and  supplies,  $2,500.00,  estimated  worth  $1,000.00  Furniture  and  fix- 
tures, $900.00,  estimated  worth  $200.00.  Investments  valued  at  $25,275.00,  of 
which  $15,000.00  is  held  by  Bankers  as  security  for  loan  of  $12,000.00.  Ac- 
counts receivable,  $6,250.00,  of  which  $2,500.00  are  good;  $1,250.00  bad;  and 
$2,500.00  estimated  to  realize  $1,500.00.  Cash  $575.00,  of  which  $25.00  repre- 
sents petty  expense  items  not  charged  up,  and  $50.00  an  I.  O.  U.  of  a  former 
employe  which  is  worthless.  Accounts  Payable,  $28,500.00.  Bills  Payable, 
$25,000,  of  which  $12,000.00  is  due  Bankers.  Wages  due,  $500.00.  Rent  due 
and  past  due  $1,000.00.  Capital  on  January  I,  1907,  as  shown  by  the  books, 
$15,000.00.  Loss  by  sale  of  investment  May  I,  1907,  $5,000.  Loss  in  trading 
account  January  I,  1907,  to  December  I,  1907,  $3,50000.  Drawings  charged 
personal  account  of  John  Mapleton,  $1,000.00. 

Make  up  a  statement  of  affairs  and  a  deficiency  account  as  on  December  I, 
1907. 
Illinois,  1907. 


PROBLEM  XXXVI 

John  Thompson  exhibits  the  following  balance  sheet  of  his  business,  dated 
June  30,  1900: 

Cash                                      $750                   Sundry  creditors  $6,000 

Book  debts                         9,500                  Bills  Payable  7,500 

Stock  on  hand                   6,500                  Bank  (overdraft)  3,ooo 

Fixtures,  etc.                      1,75°                  Balance  2,000 


Total  $18,000  Total  $18,500 

On  questioning  Thompson  it  was  found  that  he  had  omitted  the  following 
from  his  balance  sheet:  $250  owing  for  rent;  $75  owing  for  taxes;  $2,500  bor- 
rowed at  5%  from  his  wife  three  years  ago,  no  payment  having  been  made  on 
account  of  either  principal  or  interest;  a  draft  for  $500  accepted  by  a  firm  with- 
out consideration,  falling  due  in  30  days.  His  private  and  household  debts 
amounted  to  $600. 

The  item  entered  on  his  balance  sheet  as  cash  included  his  personal  I.  O.  U.'s 
for  $600. 

Of  the  book  debts  about  $3,500  might  be  considered  bad  and  the  rest  good. 
The  stock  was  good  except  $1,000,  which  would  not  produce  more  than  $100. 
The  fixtures,  if  sold,  would  not  realize  more  than  $250.  The  only  other  assets 
were  household  furniture  worth  about  $1,250  and  residence  valued  at  $7,500, 
subject  to  a  first  mortgage  for  $5,000  at  4%,  and  also  a  second  mortgage  held  by 
his  bank  as  security  for  overdraft. 

Prepare  a  statement  of  affairs  and  deficiency  account. 
New  York,  1902- 


PROBLEM   XXXVII 

Walter  Hopkins,  while  perfectly  solvent  and  doing  a  profitable  manufact- 
uring business,  had  so  tied  up  his  capital  in  plant  and  materials  that  he  was 
on  the  point  of  suspending  for  want  of  funds  to  pay  for  labor,  and  his  creditors 
were  preparing  to  commence  legal  proceedings  to  enforce  a  settlement.  The 
condition  of  his  affairs  at  this  time  was  as  follows: 

BALANCE  SHEET 

Assets  Liabilities 

Plant  $25,198 

Cash  212  Creditors  $20,230 

Materials,    raw    and  Capital  50,000 

partly  finished  40,400  Surplus  4>9OO 

Finished  goods 
Accounts  receivable 

$75,130  $75,130 

At  a  meeting  of  creditors  he  said  that  while  his  plant  was  entirely  efficient,  it 
was  all  of  special  character  and  would  realize  on  forced  sale  only  the  value  of 
scrap,  that  the  unfinished  goods  would  require  the  employment  of  skill  and 
processes  known  to  him  only,  and  that  while  forced  suspension  would  yield  to 
his  creditors  not  over  50%,  it  would  ruin  him  absolutely. 

The  creditors  decided  to  advance  him  a  loan  of  $5,000  to  continue  operations 
and  allow  him  additional  credit  for  materials  and  expenses.  A  trustee  was  ap- 
pointed to  see  that  the  proceeds  were  used  solely  for  recuperation  of  the  business. 

The  subsequent  operations  under  the  supervision  of  the  trustee  were  as  follows: 

Purchases  on  book  account,  charged  to  materials,  $5,100;  to  expense,  $12,100; 
sales  on  book  account,  $57,802;  losses  on  bad  debts,  $300;  cash  receipts  (loan 
from  creditors),  $5,000;  settlement  from  debtors,  $58,100;  cash  payments  for 
labor,  $12,500;  for  expense,  $4,350;  for  plant,  $600.  Creditors,  $42,030; 
Walter  Hopkins,  personal  drawings,  $3,000. 

There  remained  raw  materials,  $4,000;  finished  goods,  $22,388. 

Prepare  (a)  realization  and  liquidation  account;    (b)  trustee's  cash  account; 
(c)  balance  sheet  of  the  estate  as  restored  to  Walter  Hopkins. 
New  York,  1906. 


PROBLEM   XXXVIII 

X,  Y  and  Z,  foundrymen,  unable  to  meet  their  obligations,  suspended  payment 
January  i,  1902,  and  appointed  a  trustee  to  realize  and  liquidate  for  the  benefit 
of  their  creditors.  The  books  showed  the  following  assets  and  liabilities: 

ASSETS 

Land  and  buildings  $125,000 

Machinery  and  tools  75,000 

Furniture  and  fixtures  10,000 

Materials  and  supplies  95,000 

Bills  receivable  15,000 

Accounts  receivable  115,000 

Cash  450 

Total  assets  $43545° 

LIABILITIES 

Mortgage  on  foundry  premises 

Bills  payable 

Accounts  payable 

Interest  accrued  on  mortgage 

Taxes  accrued  (estimated) 

Capital 

Total  liabilities  $435,450 

The  trustee's  cash  receipts  and  payments  during  the  year  1902  were  as  follows: 

RECEIPTS 

Bills  receivable  (outstanding  Jan.  I,  1902)  $15,000 

Accounts  receivable  (outstanding  Jan.  I,  1902)  106,500 

Cash  sales  5,435 

Bills  receivable  (contracted  during  year  1902)  ^Soo 
Accounts  receivable  (contracted  during  year  1902)         212,000 

Total  receipts  —     $352,435 

PAYMENTS 

Bills  payable  $25,000 

Accounts  payable  35,ooo 

Interest  on  mortgage  one  year  at  5%  5,ooo 

Taxes  for  the  year  1901  865 

Purchases  of  materials  and  supplies  98,000 

Labor  135,000 

General  expenses  45,000 

Interest  on  bills  payable  to  Sept.  30,  1902,  at  5%  2,800 

Total,  payments  $346,665 


Other  transactions  were  as  follows: 


Sales  on  credit 

Bad  debts  written  off: 

Accounts  prior  to  Jan.  i,  1902 
Accounts  subsequent  to  Jan.  I,  1902 

Discounts  and  allowances  to  customers: 
Accounts  prior  to  Jan.  i,  1902 
Accounts  subsequent  to  Jan.  i,  1902 


58,ooo 
2,000 


$500 
300 


$335,000 


10,000 


800 


Notes  received  from  customers  20,000 

Notes  given  to  creditors  ($110,000  being  renewals)  180,000 

Inventory  of  materials  and  supplies  Dec.  31,  1902,  amounted  to    92,000 

The  trust  terminated  at  the  end  of  the  year  and  the  business  was  turned  back 
to  the  owners. 

Prepare  realization  and  liquidation  account;   also  a  balance  sheet  showing  the 
financial  condition  of  the  business  at  the  termination  of  the  trust.     Accrue 
taxes  for  the  year  in  the  usual  manner,  i.e.,  on  the  basis  of  the  charge  for  previous 
year. 
New  York,  1903. 


PROBLEM   XXXIX 

AB,  a  commission  merchant,  doing  business  on  a  5%  basis,  hands  you  the 
following  abstract  of  his  ledger,  showing  his  transactions  for  the  year. 

Furnish  AB's  capital  account,  showing  his  original  investment,  a  balance 
sheet  and  a  detailed  cash  account. 

Sales  $45,000.00  $60,000.00 

Freight  2,100.00  1,400.00 

Claims  and  allowance  on  settled  account  only  600.00  1,500.00 

Expense  900.00 

Customers'  Accounts  60,000.00  45,000.00 

Creditors'  Accounts  37,95O.oo  39,850.00 

Cash  59,000.00  40,950.00 

Discounts  lost  400.00 


$205,950.00        $188,700.00 
New  York,  1910. 


PROBLEM   XL 

A  and  B,  commission  merchants,  suspect  their  cashier  of  embezzlement. 
From  the  following  data  determine  whether  or  not  their  suspicions  are  well 
founded,  and  produce  a  balance  sheet  and  profit  and  loss  statement  to  prove  or 
disprove  the  suspicion. 

Sales  $42,000 

Cash  Receipts,  customers  $42,000 

Freight  4,240  2,480 

Duty  2,120  1,240 

Dock  charges  212  124 

Custom  house  charges  90  45 

Interest  (account  sales  at  6%)  248 

Commission  (5%  on  sales)  ^240 

Office  Expense  2,000 

Documentary  advances  20,000  12,000 

Acceptances  against  shipments  12,000  20,000 

Analysis  of  account  sales  ledger  debits,  duty  $875,  freight  $1,560,  dock  charges 
$70,  custom  house  charges  $40. 
New  York,  1914. 


PROBLEM   XLI 

December  i,  1905,  a  New  York  merchant  ships  goods  of  the  value  of  $5,000 
on  consignment  to  a  commission  merchant  at  Rio  de  Janeiro,  insuring  them  in 
the  Atlantic  Mutual  against  loss  or  damage  in  transit  and  prepaying  freight 
and  insurance  amounting  to  $250.  On  arrival  the  goods  are  found  to  be  in  a 
partially  damaged  condition  and  the  loss  is  adjusted  at  $1,000,  the  certificates 
for  which  the  consignee  transmits  to  the  consignor  together  with  an  account 
sales  for  $3,000,  dated  March  i,  1906,  and  a  final  account  sales  for  $2,000,  dated 
April  i,  1906.  A  draft  on  New  York  for  $4,300  accompanied  this  final  account, 
being  the  balance  due  after  deducting  duty  paid  and  commission  earned. 

Give  expression  to  these  transactions  on  the  books  of  the  consignor. 
New  York,  1906. 


PROBLEM   XLII 

A  B  and  Co.  and  C  D  and  Co.  enter  a  joint  adventure  to  ship  machinery 
to  New  Zealand.  C  D  and  Co.,  10/5/96  handed  A  B  and  Co.  $600  in  cash 
and  granted  them  their  acceptance  at  6  months  for  $1,500.  A  B  and  Co.  were 
to  provide  balance  of  cash  required,  to  manage  the  venture,  to  receive  a  com- 
mission of  2%  on  amount  of  invoice  for  machinery.  Profits  of  venture  to  be 
divided  equally. 

On  10/6/96,  A  B  and  Co.  paid  J  K  and  Co.  for  machinery  $2,500,  and  on 
the  same  date  discounted  acceptance  of  C  D  and  Co.  for  $1,500,  paying  $30  for 
discount  thereon.  On  the  following  day  A  B  &  Co.  paid  $210  for  freights  and 
$30  for  insurance.  On  3/25/97,  A  B  and  Co.  received  from  New  Zealand  to 
account  of  proceeds  of  machinery  a  draft  payable  in  London  for  $1,600,  out  of 
which,  4/8/97,  they  paid  $1,500  to  retire  bills  for  that  amount. 

On  8/10/97,  A  B  and  Co.  received  from  New  Zealand  a  draft  for  $1,550, 
being  balance  of  proceeds  for  machinery,  after  deducting  agent's  commission 
charges  and  duty.  They  thereupon  closed  the  accounts  and  sent  C  D  and  Co. 
check  for  balance  due  to  them. 

Make  up  an  account  showing  result  of  venture,  also  C  D  and  Co.'s  account 
with  A  B  and  Co.    Do  not  regard  interest. 
Penna.,  1901. 


PROBLEM   XLIII 

The  trial  balance  of  Jones  and  Smith,  Chicago  branch,  shows  Dec.  31,  1904, 
the  following: 

Home  office  $2,000 

Due  from  customers  $2,500 

Cash  on  hand  1,000 

Expenses  1 ,900 

Merchandise  3,400 


$5,4QO        $5,400 

Inventory  $1,000. 

Draft  the  necessary  journal  entries  to  close  the  accounts  on  the  branch  books, 
and  the  entries  to  be  made  in  the  home  office  to  make  the  books  agree. 
New  York,  1905. 


PROBLEM   XLIV 

A  branch  office  business  was  started  at  the  first  of  the  year,  the  head  office 
advancing  $5,000  cash.  During  the  first  year  merchandise  was  shipped  to 
branch,  invoiced  at  $75,000. 

An  auditor  checking  up  the  business  at  the  close  of  the  year  finds  the  following: 

Merchandise  sales  were  $60,000,  with  selling  price  of  goods  20%  advance  on 
invoice. 

Proper  vouchers  were  on  file  duly  receipted  for  following  payments: 

Rebates  and  allowances  on  damaged  goods  $1,500.00 

Salaries  and  other  expenses  4,500.00 

Freights  2,500.00 

The  books  also  showed: 

Remittances  to  head  office  $35,000.00 

Uncollected  accounts  15,000.00 

The  balance  of  the  sales  having  been  realized  in  cash,  less  rebates  and  allow- 
ances as  noted. 

The  cash  on  hand  and  inventory  of  unsold  goods,  together  with  the  foregoing 
records,  properly  accounts  for  everything. 

Prepare  statement,  such  as  an  auditor  would  make  in  reporting  to  the  head 
office,  balancing  the  business  of  the  branch  house. 
Mass.,  1910. 


PROBLEM   XLV 


C,  D  and  E  are  partners  sharing  profits  in  accordance  with  capital  invest- 
ments. At  end  of  the  fiscal  year,  after  all  nominal  accounts  are  closed,  the  books 
show  the  following: 


Cash 

Plant 

Inventory  of  merchandise 

Bills  receivable 

Book  accounts  receivable 

C  drawings 

D  drawings 

E  drawings 

Bills  payable 

C  capital 

D  capital 

E  capital 

Profit  and  Loss,  undivided  profits 


$20,051 

60,422 

41,300 

18,028 

70,402 

8,400 

6,000 

4,800 


$5,211 
100,000 
50,000 
50,000 
24,192 


$229,403        $229,403 


The  partners  thereupon  incorporate  a  company  with  an  authorized  capital 
of  $250,000.  The  company  so  formed  purchased  the  partnership  assets  and  good 
will,  not  including  the  cash,  for  $250,000,  payable  $200,000  in  stock  and  $50,000 
in  cash,  the  last-mentioned  cash  being  the  proceeds  of  sale  of  stock  to  F. 

It  is  the  intention  to  divide  the  purchase-money  stock  among  the  vendors  in 
proportion  to  their  former  capital  and  to  adjust  their  accounts  by  the  division 
of  the  cash  shown  in  trial  balance,  which  will  then  be  placed  to  their  credit  as 
loans  to  the  company  at  6%  interest  and  remain  as  working  capital.  The  bills 
payable  are  to  be  settled  by  the  partners.  As  the  drawings  of  the  partners 
are  not  in  proportion  to  their  respective  shares  in  the  profits,  the  partners  are 
charged  with  the  interest  thereon  in  the  following  amounts,  viz.:  C  $231,  D 
$165,  and  E  $132. 

1.  Frame  the  necessary  entries  to  close  the  partnership  books  and  show 
the  amount  of  cash  received  by  each  partner. 

2.  Referring  to  question  i,  frame  the  necessary  entries  to  open  the  books  of 
the  company  and  prepare  a  balance  sheet  showing  the  condition  of  the  com- 
pany at  the  beginning  of  its  operations. 

New  York,  1906. 


PROBLEM   XLVI 


The  board  of  directors  of  the  X,  Y,  Z  Company  removed  their  manager  on 
April  30,  1915,  on  the  general  suspicion  that  his  books  misrepresented  the  true 
financial  condition  of  the  business.  Prepare  a  statement  showing  the  nature 
and  the  probable  extent  of  the  misrepresentation,  also  an  approximate  state- 
ment of  income  and  profit  and  loss  for  the  four  months  ending  April  30,  1915, 
and  a  balance  sheet  as  of  April  30,  1915. 

The  following  is  a  trial  balance  taken  from  the  books  April  30,  1915: 


Capital  stock 

Fixtures 

Inventory,  January  I,  1915 

Cash 

Accounts  receivable 

Accounts  payable 

Loans  payable 

Sales 

Purchases 

Salaries,  salesmen 

Advertising 

Salaries,  office 

Rent 

Interest 

Insurance,  Jan.  I  to  Dec.  31,  1915 

Stationery  and  printing 

Reserve  for  depreciation  of  fixtures 

Surplus,  January  I,  1915 


$10,000 

128,600 

15,450 

24,600 


40,700 

2,200 

1,650 

1,100 

400 

200 

999 

105 


$75,000 


39,000 
10,000 
51,000 


2,710 
48,294 


$226,004        $226,004 


An  analysis  of  the  Purchases  and  Sales  accounts  revealed  the  following: 
purchases,  year  1912,  $122,000;  sales,  year  1912,  $153,750;  inventory,  Janu- 
ary i,  1912,  $101,000;  purchases,  year  1913,  $123,000;  sales,  year  1913,  $153,170; 
inventory,  January  i,  1913,  $100,000;  purchases,  year  1914,  $121,000;  sales, 
year  1914,  $154,722;  inventory,  January  i,  1914,  $102,000. 
New  York,  1915. 


PROBLEM   XLVII 


The  directors  of  a  manufacturing  company,  before  the  closing  and  auditing 
of  the  books  for  the  half  year  ending  December  31,  declared  out  of  the  net  earn- 
ings of  the  company  a  dividend  for  the  half  year,  of  4%  on  the  preferred  stock  of 
$100,000  and  3%  on  the  common  stock  of  $100,000.  There  has  been  brought 
forward  from  the  last  half  year,  an  undivided  balance  of  profit  of  $4,000,  and 
after  the  audit  of  the  books  the  trial  balance  is  found  to  be  as  follows: 


TRIAL   BALANCE,    DECEMBER   3! 


Real  estate  and  building 

Plant  and  machinery 

Patents  and  good  will 

Inventory,  July  I 

Purchases 

Labor 

Coal 

Salaries  general 

Salaries  management 

Insurance 

Allowances 

Freight 

Discount  and  interest 

Cash  in  bank 

Investments 

Miscellaneous  expense 

Book  debts 

Pfd.  stock  in  treasury 

Repairs 


$32,500 
40,000 
80,000 
29,000 
82,500 
88,000 

6,000 
11,000 

5,000 

875 

6,250 

1,500 

750 

8,000 

15,500 
4,300 

42,000 
5,000 
1,000 

$459,175 


Preferred  stock 

Common  stock 

Sales 

Notes  payable 

Accounts  payable 


$100,000 
100,000 

219,175 
26,000 
14,000 


$459,175 


Stock  on  hand,  $26,500.  From  the  above  prepare  profit  and  loss  and  income 
statement  and  balance  sheet,  giving  effect  in  accounts  to  depreciation  at  the 
rate  of  7^%  a  year,  on  plant  and  machinery,  and  making  an  allowance  of  5% 
on  the  book  debts  to  provide  for  bad  debts;  also  create  a  liability  in  the  balance 
sheet  for  dividend  as  stated. 
New  York,  igio. 


PROBLEM   XLVIII 

Three  manufacturers,  each  having  an  independent  business  and  wishing  to 
effect  a  consolidation  of  their  respective  interests,  organize  the  United  States 
Manufacturing  Corporation,  with  an  authorized  capital  stock  of  $1,500,000, 
consisting  of  7,500  shares  of  preferred  stock  and  7,500  shares  of  common  stock 
of  $100  each.  They  sell  to  the  new  company  all  of  their  real  estate,  buildings, 
machinery,  tools,  fixtures,  merchandise  and  supplies,  in  consideration  of  $1,500,- 
ooo,  and  agree  to  accept  in  payment  $750,000  of  preferred  and  $750,000  of  com- 
mon stock  of  the  United  States  Manufacturing  Corporation  at  par.  The  vendors 
donate  to  the  treasury  of  the  company  $150,000  of  preferred  stock  and  $150,000 
of  common  stock  to  provide  for  working  capital.  The  company  sells  $100,000  of 
its  preferred  stock  in  the  treasury  for  80%  cash,  giving  a  bonus  to  the  purchaser 
of  20%  in  common  stock. 

For  the  purpose  of  raising  additional  funds  for  improvements  and  addi- 
tions to  plants,  the  company  mortgages  its  real  estate  and  buildings,  as  security 
for  an  issue  of  bonds  amounting  to  $250,000.  These  bonds  the  company  sells  to 
bankers  at  90%,  giving  as  a  bonus  10%  of  preferred  stock  and  20%  of  common 
stock. 

Draft  entries  to  express  correctly  the  above  transactions  on  the  books  of  the 
corporation,  and  prepare  a  statement  of  assets  and  liabilities  of  the  company. 
New  York,  1903. 


PROBLEM   XLIX 

1.  On  paper  ruled  as  for  a  stock  ledger  make  entry  of  the  following  stock  tran- 
sactions of  William  Henderson,  closing  the  account  as  of  October  31,  1904,  and 
carrying  down  the  balance: 

(a)  100  shares  (par  value  $100)  originally  issued,  full  paid  at  par  to  William 
Henderson  by  certificate  No.  5,  August  16,  1904. 

(b)  William  Henderson  sells  50  shares  of  the  original  100  to  Charles  Gibbons 
at  $120,  September  14,  1904,  receiving  certificate  No.  37  for  shares  retained. 

(c)  October  28,   1904,  William  Henderson  purchases  from  John  Hogan  25 
shares  at  $115  and  receives  certificate  No.  78. 

New  York,  1905. 

2.  Stockholders  of  the  Deep  Canal  Company  donated  400  shares  of  stock  of  a 
par  value  of  $100  per  share  for  the  purpose  of  providing  working  capital. 

Three  hundred  shares  of  the  treasury  stock  were  sold  by  agents  at  90.  A  com- 
mission of  10%  and  expenses  of  $516  was  allowed  the  agents  for  selling.  The  300 
shares  of  treasury  stock  were  sold  on  the  installment  plan,  10%  down  and  10%  a 
month  for  the  balance.  Certificates  of  stock  not  to  be  issued  until  paid  in  full. 

Six  months  later  you  are  to  enter  the  total  amount  of  cash  paid  on  installments, 
excluding  the  initial  payment  which  was  made  at  the  time  of  subscription. 

At  the  end  of  eight  months  one  hundred  subscribers  defaulted  on  their  sub- 
scription contracts.  Their  subscriptions  were  cancelled  and  the  payments  they 
had  made  declared  forfeited. 

The  balance  of  all  subscription  accounts  except  those  cancelled  by  default  have 
been  paid  in  full  and  stock  certificates  therefor  duly  issued. 

a.  Write  all  the  necessary  journal  entries. 

b.  Construct  a  suitable  installment  book  and  record  in  it  the  above  transac- 
tions. 


PROBLEM    L 


Subscriber 

No.  Shares    Amount 

C.  Dunn 

100          $10,000 

E.  Ferris 

200            20,000 

G.  Hall 

400            40,000 

The  Frost  Mfg.  Co.  was  incorporated  April  10,  1915,  with  a  capital  stock  of 
$200,000  divided  into  2,000  shares  of  a  par  value  of  $100  each. 

Payments  were  made  on  this  date  as  indicated  in  the  following  subscription 
register: 

Form  of  Payment 
Cash 
Cash 

Cash  $10,000  and  Hall's  note  with  in- 
terest at  6%,  due  in  one  year,  for  the 
balance. 

April  12.  Expenses  of  $1,200  incidental  to  the  organization  of  the  corporation 
were  paid  in  cash. 

April  15.  The  corporation  purchased  J.  King's  entire  plant  valued  at  $170,000 
and  assumed  his  liabilities  amounting  to  $70,000,  giving  in  full  payment  1,200 
shares  of  stock  at  par. 

April  20.  S.  Samson  subscribed  for  50  shares  of  stock  and  paid  an  installment 
of  $30  per  share  in  cash. 

April  22.  To  provide  working  capital,  each  of  the  following  stockholders  do- 
nated i-io  of  his  shares  of  stock;  Dunn,  Ferris,  Hall  and  King. 

April  25.   Cash  was  received  for  100  shares  of  donated  stock  sold  at  85. 

April  27.  Samson  gave  his  note  due  in  six  months  for  the  balance  due  on  his 
stock  subscription. 

April  28.  The  directors  authorized  an  issue  of  $50,000  in  bonds,  with  interest 
at  5%,  to  mature  in  20  years. 

April  30.    Bonds  having  a  par  value  of  $30,000  were  sold  for  $28,000  in  cash. 

(a)  Write  journal  entries  to  record  fully  all  the  above  information  in  the 
financial  books  of  the  corporation. 

(b)  Prepare  the  corporation  balance  sheet  for  April  30,  1915. 


PROBLEM  LI 

The  Marine  Equipment  Company,  a  corporation,  manufactures  metal  boats 
and  deals  in  marine  supplies.  A  trial  balance  of  the  general  ledger,  December  31, 
1913,  is  given  below: 

Land  $20,000 

Buildings  50,000 

Machinery  and  Tools  40,000 

Automobile  Trucks  5,ooo 

Patents  7,000 

Office  Furniture  and  Fixtures  700 

Accounts  Receivable  19,000 

Notes  Receivable  10,700 

Notes  Receivable  Discounted  $6,000 

Raw  Materials,  Inventory  Jan.  I,  1913     20,000 

Goods  in  Process,                             "  i,     "          5,000 

Metal  Boats  Finished,          "           "  I,     "          8,000 

Marine  Supplies,                              "  i,     "        12,000 

Union  National  Bank  8,740 

Capital  Stock  100,000 

Surplus  18,000 

Treasury  Stock  10,000 

Bonds  Payable,  5%  First  Mortgage  40,000 

Reserves : 

Depreciation  of   Buildings  i  ,200 

"  Machinery  and  Tools  1,000 

"  Automobile  Trucks  200 

Notes  Payable  2,000 

Accounts  Payable  24,000 

Purchases,  Raw  Material  40,000 

Marine  Supplies  30,000 

Freight  Inward,  Raw  Materials  2,450 

"       Marine  Supplies  1,340 

Freight  and  Cartage  Outward  824 

Sales,  Metal  Boats  131,130 

Sales,  Marine  Supplies  58,960 

Productive  Labor  32,400 

Non- Productive  Labor  15,230 

Superintendence  3»42O 

Heat,  Light  &  Power  8,500 

Shop  Supplies  2,490 

Miscellaneous  Factory  Expense  1,300 

Insurance  300 

Repairs  to  Machinery  &  Tools  2,146 

Taxes  400 

Advertising  3,420 


Returned  Sales  &  Allowances,  Metal  Boats  1,200 

Marine  Supplies       -862 

Discount  on  Sales  3, 710 

"        "  Purchases 

Salesmen's  Salaries  6,570 

Travelling  Expenses  2,354 

Advances  to  Salesmen  450 

Office  Salaries  8,630 

Legal  Expense  540 

Stationery  &  Printing  1,200 

Postage  190 

Interest  315 

Miscellaneous  Selling  Expense  1,180 


5,071 


$387,561      $387,561 

Additional  information  to  be  considered : 
Inventories,  December  31,  1913 

Raw  Materials  21,000 

Goods  in  Process  7,000 

Metal  Boats  Finished  13,000 

Marine  Supplies  8,000 

Accrued  Items: 

Interest  on  Bonds  Payable,  I  yr.  at  5%  2,000 

"  Notes  Payable  40 

"  Notes  Receivable  75 

Taxes  (estimated)  100 

Unexpired  Insurance  100 

Provide  for  Reserve  for  Depreciation  on 

Buildings,  5%  on  original  value 

Machinery  &  Tools,  10%  on  diminishing  value 

Automobile  Trucks,  20%  on  diminishing  value 
Also  provide  a  2%  Reserve  for  Bad  Debts 
Write  off  depreciation  of  10%  on  the  original  cost  of 

Furniture  and  Fixtures 

Patents  expire  14  years  from  January  i,  1913 
One-half  of  Advertising  is  to  be  carried  to  the  next  period 
Distribute  as  follows: 

Item  Mfg.       Selling    P  &  L 

Insurance  ^  ^  o 

Depreciation  Auto  Trucks  %  %  o 

Taxes  ^  o  % 

From  the  Trial  Balance  and  the  additional  information  prepare 

a.  Income  Statement 

b.  Balance  Sheet 

c.  Journal  entries  to  record  the  additional  information  and  close  the 

Ledger. 


PROBLEM   LII 

A  corporation  issues  lo-year  bonds  to  the  amount  of  $50,000,  securing  same 
by  a  mortgage  on  its  property,  which  is  placed  in  the  hands  of  a  trust  company. 

The  trust  deed  provides  for  the  establishment  of  a  sinking  fund  to  retire  the 
bonds  at  maturity  and  that  equal  annual  payments  be  made  on  the  first  of  Jan- 
uary in  each  year.    Give  the  amount  of  this  annual  payment,  interest  compounded 
at  6%. 
Canada,  1910. 


PROBLEM   LIII 

The  United  Manufacturing  Company,  on  January  i,  1906,  placed  in  service 
a  piece  of  machinery  which  would  depreciate,  according  to  its  chief  engineer,  at  the 
rate  of  15%  per  annum.  The  original  cost  of  this  machinery  was  $84,000  and 
the  Board  of  Directors  agreed  to  set  aside  annually  a  sinking  fund  which,  together 
with  interest  thereon,  will  amount  to  the  original  cost  at  the  end  of  the  prospec- 
tive life  of  the  machinery. 

This  sinking  fund  is  to  be  deposited  with  a  trust  company  on  December  31 
of  each  year,  and  a  proportionate  amount  at  the  end  of  the  last  partial  year  of  the 
life  of  the  machine.  Interest  is  to  be  credited  by  the  trust  company  at  each  of 
these  dates  at  the  rate  of  4%  per  annum. 

Show  how  the  amount  of  the  annual  sinking  fund  payments  may  be  arrived  at 
and  prepare  a  detailed  statement  for  the  Board  of  Directors  proving  that  the 
amount  so  obtained  is  correct. 
New  York,  1911. 


PROBLEM   LIV 

1.  John  Doe  commenced  business  with  a  cash  capital  of  $15,000.     At  the 
close  of  his  fiscal  period  the  ledger  accounts  were:  Accounts  Receivable,  $4,312.50; 
Merchandise  Debit  Balance,  $5,062.50;    Accounts  Payable,  $5,375;    Expense, 
$900.    Doe's  total  loss  was  $2,775. 

Prepare  a  statement  of  assets  and  liabilities  and  the  profit  or  loss, 
New  York,  1914. 

2.  John  Adams  lost  his  stock  of  merchandise  May  I,  1914,  through  a  flood 
in  the  Mississippi  River. 

Adams  applied  to  the  local  Mutual  Flood  Insurance  Society  for  reimburse- 
ments, claiming  a  loss  of  $5,886.35  on  merchandise  stock.  From  the  following 
data  ascertain  his  merchandise  inventory: 

Net  profits,  May  I,  1914,  $4,452.91;  drawings,  $1,598;  legal  expenses,  $17.50; 
interest  debit,  $313;  advertising,  $14;  commissions  debit,  $961.01;  insurance, 
$196.23;  sales,  $81,688.04;  inventory  December,  1911,  $1,568.62;  purchases, 
$55,415.82;  labor,  productive,  $19,499.58;  telephone,  $416.06;  sundry  factory 
expenses,  $3,201.92;  repairs,  $16;  surplus,  May  I,  1914,  $2,854.91. 
New  York,  1914. 


PROBLEM   LV 

A  and  B  are  partners  owning  two  retail  stores,  one  in  Paterson  and  the  other 
in  Newark.  They  agree  to  dissolve  partnership  as  of  July  i,  1912.  The  two 
stores  are  valued  July  I,  1912,  as  follows:  Paterson,  $4,573.50;  Newark,  $3,600. 
On  this  basis  B  contemplates  purchasing  A's  interest.  On  being  furnished  with 
the  following  data,  B  requests  you  to  inform  him  if  the  inventory  of  the  Paterson 
store,  January  i,  1912,  was  correct  as  A  claims: 

Value  of  alleged  inventory,  January  i,  1912,  in  the  Paterson 

store  $3,800.00 

Purchases  for  both  stores,  January  to  July,  paid  for  5,128.80 

Due  to  creditors  on  account  of  both  stores,  July  I  1,500.00 

Cash  sales,  Newark  store  1,875.00 

Cash  sales,  Paterson  store  3,105.00 

Purchases,  Paterson  store,  January  to  July  3,326.00 
Profits  50%  of  sales. 

Prepare  a  statement  proving  whether  or  not  the  inventory  of  the  Paterson 
store,  January  i,  1912,  was  correct  as  stated. 
New  York,  1913. 


PROBLEM    LVI 


Robert  Adams  and  William  Stevens  are  equal  partners.  On  the  night  of 
July  3,  their  stock  and  fixtures  were  destroyed  by  fire.  A  Trial  Balance,  which 
Adams  had  at  his  home,  showed  the  following  condition  of  the  ledger  at  the  close 
of  business,  June  30: 


Robert  Adams 

William  Stevens 

Cash 

Fixtures 

Mdse.  Purchases 

Mdse.  Sales 

Notes  Receivable 

Notes  Payable 

Interest 

Expense 

Customers 

Creditors 


$600.00    $  7,450.00 
600.00         7,450.00 
3,309.00 
1,500.00 
32,600.00 


i  ,000.00 

I2O.OO 

78O.OO 

4,500.00 


24,8OO.OO 

2,000.00 
50.00 


3,259-00 


$45,009.00      $45,009.00 


The  property  is  fully  covered  by  insurance.  The  Insurance  Company,  for  the 
purpose  of  estimating  the  value  of  the  merchandise  destroyed,  has  agreed  to 
allow  35%  as  the  average  gross  gain  on  the  sales,  and  to  pay  66-2/3%  on  the 
value  of  the  fixtures  as  shown  by  the  ledger. 

On  the  basis  of  this  agreement,  state  the  result  of  the  business  and  the  capital 
of  each  partner. 

New  York,  1902. 


PROBLEM   LVII 


The  Elton  Mfg.  Co.  and  the  Star  Mfg.  Co.  were  engaged  in  manufacturing  the 
same  kind  of  goods.  To  avoid  the  losses  due  to  competition  the  two  companies 
decided  to  combine  their  plants  into  one  corporation  under  the  name  of  the 
Union  Mfg.  Co.  and  finally  agreed  upon  the  following  plan  for  the  merger: 

The  assets  received  from  and  the  liabilities  assumed  for  the  separate  companies 
were  taken  at  the  values  given  in  the  respective  balance  sheets,  subject  to  the 
following  adjustments: 

The  Buildings,  Machinery  and  Patents  at  90%  of  their  stated  value.  Delivery 
Equipment  and  Furniture  and  Fixtures  at  80%  of  their  value.  A  Reserve  of 
2%  on  Accounts  Receivable  was  established  by  the  Star  Mfg.  Co. 


ELTON  MFG.  Co.,  BALANCE  SHEET,  JUNE  30,  1914. 


Land  $10,000 

Buildings  60,000 

Machinery  and  Tools  30,000 

Delivery  Equip.  3,5OO 

Furniture  and  Fix.  1,500 

Inventory  Mat.  10,000 

Fin.  Goods  2,500 

Accts.  Rec.  35,ooo 

Unexpired  Insurance  500 

Cash  4,000 


Accts.  Payable 
Mtge.  Payable 
Accrued  Wages 
Res.  for  Bad  Debts 
Stock,  Capital 
Surplus 


$30,000 

14,000 

1,500 

1,500 

100,000 

10,000 


157,000 
STAR  MFG.  Co.,  BALANCE  SHEET,  JUNE  30,  1914. 


Machinery  and  Tools 
Motor  Trucks 
Patents 
Furn.  and  Fix. 
Inventory,  Materials,  etc. 
Finished  Goods 
Accts.  Rec. 
Cash 


$35,ooo 

4,000 

6,000 

500 

8,000 

5,000 

50,000 

1,500 

110,000 


Accts.  Pay. 
Notes  Pay. 
Capital  Stock 
Surplus 


157,000 


30,000 
19,000 
50,000 
11,000 


110,000 


After  making  the  adjustments  and  allowing  interest  at  6%  on  the  invested 
capital,  the  excess  earnings  were  capitalized  on  a  basis  of  10%  to  obtain  the 
amount  of  the  good  will. 


Average  net  profits  for  a  period  of  three  years: 

Elton  Manufacturing  Co. 
Star 


$17,000 
10,800 


The  Union  Mfg.  Co.  was  capitalized  at  an  amount  equal  to  the  net  assets 
(after  adjustments)  and  the  good  will  of  the  two  merged  companies. 

1.  Find  the  capitalization  of  the  Union  Mfg.  Co.  and  the  amount  of  preferred 
and  common  stock  allotted  to  each  of  the  merged  companies. 

2.  Write  the  journal  entries  to  open  the  books  of  the  Union  Mfg.  Co. 

3.  Prepare  the  Balance  Sheet  for  the  Union  Mfg.  Co. 

4.  Write  the  closing  journal  entries  for  the  Star  Mfg.  Co. 


PROBLEM   LVIII 


It  is  proposed  to  organize  a  corporation  for  the  purpose  of  acquiring  the  stock 
and  controlling  three  existing  corporations,  A,  B,  and  C,  two  of  which  latter,  A 
and  B,  have  been  in  operation  for  five  and  three  years,  respectively,  while  C  has 
been  newly  organized.  The  assets  and  liabilities  of  the  several  existing  companies 
and  the  dividends  paid  are  as  follows : 


ASSETS 


Plant 

Material 

Cash 


ABC 

$400,000        $300,000 
295,000          425,ooo 
40,000  15,000        $500,000 

$735,ooo        $740,000        $500,000 


LIABILITIES 


Capital 

Surplus 

6%  Bond  at  5  years 

Current  liabilities 


A 

$100,000 

60,000 

500,000 

75,000 


B 

$300,000 

40,000 

300,000 

100,000 


C 

$500,000 


$735,ooo   $740,000   $500,000 


DIVIDENDS   PAID 

$I2O,OOO  $   3O,OOO 

For  the  purpose  of  the  issuance  of  stock  in  the  new  company  to  the  holders  of 
stock  in  the  three  existing  companies,  it  is  proposed  to  capitalize  the  latter  upon 
the  following  basis: 

Money  assets  at  double  their  value;  plant  at  80%  of  book  values;  material  at 
70%  of  book  values;  annual  net  earnings  at  8%;  and  the  liabilities  at  par. 

The  new  company  will  be  organized  with  a  capital  stock  of  $2,200,000,  all  of 
which  is  to  be  used  in  acquiring  the  stock  of  the  existing  companies. 

(1)  What  amount  of  stock  in  the  new  company  are  the  owners  of  the  stock  in 
each  of  the  existing  companies  entitled  to  receive? 

(2)  Give  a  short  criticism  attacking  the  above  basis  of  stock  allotment  and 
submit  a  more  equitable  basis. 

Penna.,  1906. 


PROBLEM   LIX 


The  Smith  brewing  company  with  $1,000,000  capital  stock,  the  Young  brewing 
company  with  $500,000  capital  stock,  and  the  Star  brewery  with  $400,000  capital 
stock,  agree  to  consolidate  as  the  Universal  brewing  corporation,  the  new  company 
to  buy  all  the  properties  of  the  old  companies,  at  a  valuation  to  be  fixed  by 
appraisal,  payment  therefor  to  be  made  in  full-paid  stock  of  the  new  company, 
the  old  companies  to  pay  off  their  own  indebtedness. 

The  appraised  values  of  the  old  companies  are  as  follows: 


Real 

Bills 

Horses 

Office 

estate 

Plant 

Cash 

Receiv- 

Wagons 

Furni- 

Total 

and 

able 

and 

ture 

buildings 

harness 

Smith 

$680,000 

$390,000 

$15,000 

$10,000 

$4,000 

$1,000 

$1,100,000 

Young 

327,000 

160,000 

3,000 

6,000 

3,000 

1,000 

500,000 

Star 

126,000 

71,000 

1,000 

i  1,500 

500 

200,000 

Total  appraised 

value 

$1,800,000 

On  this  valuation,  the  Universal  brewing  corporation  issued  $2,000,000  of 
stock,  shares  $100  each,  which  was  divided  pro  rata  among  the  old  companies  on 
the  basis  of  their  appraised  value,  no  fractional  shares  of  stock  to  be  issued,  odd 
amounts  to  be  paid  old  companies  in  cash. 

Give  journal  entries  necessary  to  set  up  property  accounts  and  credit  old 
companies  with  their  pro  rata  on  books  of  the  new  company. 

At  the  time  of  the  consolidation  the  ledger  accounts  of  the  Star  brewery  were 
as  follows: 


Real  estate  and  buildings  $250,000 

Plant  247,000 

Cash  1 ,000 

Horses,  wagons  and  harness  1,800 

Office  furniture  1,200 

$501,000 


Capital  stock 
Bills  payable 
Accounts  payable 


|.00,000 

50,000 
51,000 


$501,000 


Make  the  proper  journal  entries  to  liquidate  in  stock  of  the  new  company  the 
liabilities  other  than  capital  stock,  to  apportion  the  remaining  stock  and  cash, 
and  to  close  the  books  of  the  Star  brewery. 
New  York,  1902. 


PROBLEM   LX 

The  following  is  abstracted  from  an  agreement  of  merger  and  consolidation 
made  December  31,  1908,  between  the  Pennsylvania  Tool  Co.,  party  of  the  first 
part,  and  the  Keystone  Tool  Co.,  party  of  the  second  part.  Said  parties  of  both 
parts  being  corporations  duly  organized  and  existing  under  the  laws  of  the  state 
of  Pennsylvania,  by  this  agreement  merge  and  consolidate  into  a  single  corpora- 
tion. 

The  name  of  the  corporation  hereby  formed  by  said  consolidation  shall  be  The 
Pennsylvania  Tool  Co. 

The  amount  of  capital  stock  of  the  new  corporation  is  $100,000,  all  of  which 
shall  be  common  stock  divided  into  1000  shares  of  a  par  value  of  $100.  The 
manner  of  distributing  capital  stock  shall  be  as  follows: 

The  capital  stock  of  the  Pennsylvania  Tool  Co.,  party  of  the  first  part,  shall 
be  exchangeable  for  capital  stock  of  the  new  corporation,  share  for  share,  and  the 
balance  of  the  capital  stock  of  the  new  corporation  hereby  formed  shall  be  dis- 
tributed to  the  stockholders  of  the  Keystone  Tool  Co.  in  proportion  to  their 
present  holdings. 

The  Pennsylvania  Tool  Co.,  party  of  the  first  part,  was  incorporated  shortly 
before  the  date  of  the  merger,  and  had  transacted  no  business  other  than  the 
issuance  of  ten  shares  of  capital  stock,  $100  each,  for  which  payment  of  $1000 
had  been  received,  and  which  was  on  hand  in  the  treasury  of  the  company  on 
the  date  of  the  merger,  and  directly  after  the  merger  transferred  to  the  bank 
deposit  account  of  the  consolidated  company  and  credited  to  an  account  called 
"Suspense." 

The  Keystone  Tool  Co.  had  for  a  number  of  years  been  actively  engaged  in 
business.  Its  fiscal  year  ended  September  30,  1908,  at  which  time  an  inventory 
was  taken  and  its  accounts  had  been  properly  closed.  At  the  date  of  the  merger 
the  following  trial  balance  was  drawn  from  the  books: 

Debits  Credits 

Cash  $  20,000.00 

Accounts  Receivable  15,000.00 

Merchandise:  Inventory,  September  30,  1908  130,000.00 

Merchandise  purchases  250,000.00 

Expenses  25,000.00 

Accounts  Payable  $  10,000.00 

Sales  300,000.00 

Capital  Stock  30,000.00 

Undivided  profits:  Balance,  September  30,  1908  100,000.00 


Totals  $440,000.00    $440,000.00 

The  account  books  of  this  concern  were  not  closed  at  the  date  of  the  merger 
and  no  inventory  was  taken,  although  the  exchange  of  capital  stock  was  effected 
and  also  all  business  after  December  31,  1908,  was  transacted  under  the  name  of 


The  Pennsylvania  Tool  Co.,  and  it  was  not  until  March  31, 1909,  that  an  account- 
ant was  asked  to  state  the  accounts  of  the  new  company  from  the  date  of  the 
consolidation. 

At  March  31,  1909,  before  the  accountant  had  commenced  his  work,  an  inven- 
tory was  taken  which  showed  the  value  of  merchandise  on  hand  as  at  that  date, 
to  be  $216,250.00,  and  the  following  Trial  Balance  was  abstracted  from  the 
books: 


TRIAL   BALANCE,   MARCH   31,    1909 


Cash 

Accounts  Receivable 

Merchandise  inventory  Sept.  30,  1908 

Merchandise  purchased 

Expenses 

Accounts  payable 

Sales 

Suspense 

Capital  Stock 

Undivided  profits 

Totals 


Debits 
$  26,000.00 

10,000.00 
130,000.00 
600,000.00 

60,000.00 


Credits 


$  10,000.00 
685,000.00 

1,000.00 

30,000.00 
100,000.00 


$826,000.00    $826,000.00 


Prepare  a  Balance  Sheet  of  the  consolidated  company  as  at  March  31,  1909, 
and  a  Profit  and  Loss  account  arranged  to  show  the  profits  of  the  consolidated 
company  for  the  three  months  ended  March  3 1st;  and  of  the  Keystone  Tool  Co., 
for  the  three  months  ended  December  3ist;  also  statement  showing  the  disposi- 
tion of  profits  taken  over  by  the  new  company. 

State  what  basis  you  make  use  of  in  determining  the  approximate  value  of 
merchandise  on  hand  at  December  3 1st. 
Penna.,  1909. 


PROBLEM   LXI 

A  manufacturer  is  desirous  of  selling  his  business,  and  furnishes  a  statement 
showing  the  condition  of  affairs  for  the  past  five  years  as  follows: 

Amount  of  sales  averaging  per  year  $800,000.00 

Wages  paid  200,000.00 

Expenses  paid  80,000.00 

Raw  material  purchased  350,000.00 

Supplies  on  hand  at  present  time  40,000.00 

Machinery  in  use  at  commencement  of  the  five  years  150,000.00 

50%  of  the  above  amount  has  been  in  use  for  10 

years  previous,  and  all  additions  made  at  cost 

prices,  and  nothing  marked  off  for  depreciation. 

Carried  at  present  at  $225,000.00 

(All  repairs  have  been  charged  to  expense) 

Real  estate  valued  at  200,000.00 

What  report  would  you  make  as  to  a  fair  valuation  of  this  business?    Explain 
fully  your  reasons  for  same. 
Penna.,  1902. 


PROBLEM   LXII 


A  New  York  company  doing  business  in  London,  received  the  following  trial 
balance  from  its  London  office  at  the  end  of  a  fiscal  year: 


TRIAL   BALANCE — LONDON   OFFICE 


Plant 

Accounts  receivable 

Accounts  payable 

Expenses 

Income 

Merchandise 

New  York  office  account 

Remittance  account 

Cash 


£100,000 

75,000 

£  35,000 

10,000 

100,000 

20,000 

135,000 

60,000 

5,000 

£270,000    £270,000 


The  New  York  books  showed  as  follows: 

TRIAL   BALANCE — NEW   YORK   BOOKS 


Capital  stock 

Patents 

London  office  account 

Remittance  account 

Expenses 

Cash 


$    600,000. 
656,100. 

10,000. 

25,612.50 


$1,000,000. 


291,712.50 


[,291,712.50    $1,291,712.50 


The  remittance  account  consisted  of  four  6o-day  drafts  on  London  for  £15,000 
each,  which  were  sold  in  New  York  at  4.85^,  4.86,  4.86^  and  4.86^  respectively. 

Make  such  journal  entries  as  are  necessary  to  incorporate  with  the  New  York 
accounts  the  results  of  the  year's  business  in  London  (conversion  to  be  made  at 
the  average  rate  of  exchange  of  the  four  remittances)  and  establish  the  new 
balance  of  London  office  accounts  so  that  it  will  agree  with  the  London  books 
when  converted  into  sterling  at  4.87^,  the  rate  of  exchange  ruling  on  the  last 
day  of  the  year.  Show  also  trial  balance  of  the  New  York  books  after  closing. 
New  York, 


PROBLEM   LXIII 

A  New  York  firm  of  bankers,  doing  a  large  foreign  exchange  business  which 
involves  numerous  transactions  daily,  desires  to  change  its  system  of  accounting 
so  as  to  show  the  profit  or  loss  on  exchange  at  the  close  of  each  month.    The  details 
of  one  month's  business  are  as  follows: 
Sold: 

£156,742  sterling  at  an  average  rate  of  4.89^" 
263,500  francs        "  "     "   5.12^ 

189,600  marks       "  "          "     "     .94 

Bought  and  deposited  with  paying  agencies: 

£100,000  sterling  at  an  average  rate  of  4.85^ 
250,000  francs        "  "     "   5.15 

150,000  marks        "  "     "     .92^ 

Paid  at  paying  agencies: 

By  the  London  bank,  £95,000  sterling 
"     Paris  "      225,000  francs 

"     Berlin  "       140,000  marks 

Describe  a  convenient  method  of  showing  in  U.  S.  money  the  profit  on  this 
one  month's  business,  making  the  necessary  journal  entries,  and  preparing  the 
ledger  accounts  affected  thereby. 
New  York,  IQOI. 


PROBLEM   LXIV 

The  factory  of  an  automobile  company  assembles  its  cars  only  on  receipt  of 
orders  from  the  main  office.  A  summary  of  the  factory  operations  for  a  certain 
period  is  as  follows: 

Parts  purchased  $    162,500 

Parts  manufactured  (material  cost)  562,500 

Productive  labor  (125%  of  material)  703,125 
Factory  expense  1,128,000 
Cost  of  cars: 

Parts  purchased,  consumed  137,500 

Parts  manufactured  (material  cost)  187,500 

Productive  labor  (145%  of  material)  471,250 

Factory  expense  565,500 

Material  on  hand,  unmanufactured  500,000 

Prepare  a  technical  trial  balance  of  the  cost  ledger  and  an  inventory  of  the 
stock  room. 
New  York,  igi6. 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


*>°ff    1G?QJ1 

*•  ^  y  *?  i 

APR  11  194 

M 

APR  16  1941  W 

m.tJ     *4  d  I^Al  *fl 

M-.<    15**" 

^^v/  jS*y|  Jvf 

LD  21-100m-7,'40  (6936s) 

25214 


>' 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

-'"      -      .... 


